Author Name:   atishasingh92

the article talks about the role of proxy advisory firm in the corporate governance.

 Role of Proxy Advisory Firms In Corporate Governance

Despite the fact that shareholders can't be forced to practice their votes, market focus approach has been tried by the authorities for the involvement of institutional investors. In 2010, SEBI issued a circular to mutual funds asking them to “play an active role in ensuring better corporate governance of listed companies.” Gone are the days, when investors/shareholder used to use their exit option from the company at the time of the disagreement or clashes with decision of the management Institutional Investors have now realized their actual power and wanted to be an active participant in capital market revolutions. Along with realization of the voting power shareholder have actualized it also in changing the scenario for themselves.

Now when shareholders have become an active participant of the management of the company, they wish to cast their vote in a wise manner. And this wise manner they achieve being well informed about the affairs of the company and the effect of their vote on their shareholding and also the impact on the companies good governance policies. But the institutional investors, who have their shareholding in many companies, it’s not easy for them to cast their vote in every company in the efficient manner. It is difficult for them to analyze the implication of their votes in every company. Also it is very difficult for the institutional investors and shareholder to analyze at their own every policy agenda thoroughly and realize its legal and managerial consequences. To affectively use their powerful vote and for proper engagement with the company these institutional investors and shareholder outsource their voting decision to an independent voting research analyst.

These independent analysts also called as proxy advisory firms, they provide advisory services to the investors recommending them the effect of their vote in their shareholding and other corporate decisions. A proxy advisory firm basically protects the shareholders right which leads to good corporate governance. The recommendations given by these advisory firms are based on various corporate agendas such as appointment of directors (especially independent directors) of companies, the appointment of auditors, executive remuneration, and major corporate transactions, for example, allotment of shares, corporate restructuring and the like.

These firms are present as a watch dog over the listed company and assure that an independent research body which may affect the companies’ shareholding is watching their corporate decision and corporate governance practices. These proxy advisory firms basically help in maintaining the good governance i.e. the corporate governance practices in the companies.

There has been a recurring need to heighten the corporate governance norms in India in two past decades. Globalization may an imperative factor forcing for the need of globalized governance mechanism which has influenced Indian companies also. Securities and Exchange Board of India (SEBI) play an important role in imposing corporate governance norm to listed companies through clause 49 of the Listing Agreemnts S.E.B.I since 2000, have made it mandatory for the listed companies to comply with corporate governance structure. These major aspects of the governance structure of the company consists of transparency and disclosure practices, independence of board of directors, remunerations, an independent audit process, certification of financial statements by the chief executive officer and chief financial officer, conflict of interest, Related party transactions, insider trading and the like. A proxy advisory firm looks into these aspects of a company and influence maintain a good corporate governance policy.

This paper analyses the role of the proxy advisory firms and its impact on the corporate governance mechanism of the company. In other word, how these research analysts helps in globalization of the corporate governance mechanisms and how they influence companies policy making. The role of these firms has been analyzed engaging in the different attributes of the companies functioning like independence of board, remunerations and the like. Regulatory regimes and the working of these advisory services have also been considered. Various issues like accountability and scenarios of clash of the advices being given has also been dealt in the paper. Before concluding and making some recommendations U.S progress has been analyzed so that India may learn from it.

Corporate Governance
Proxy Advisory firms in India have flourished since 2010. And since then it stood as one of the main reasons for shareholder activism in India. Within almost 6 years of its birth, three such research analyst firms have emerged in India. The recommendations and suggestions provided by these firms regarding the voting option are regarding various corporate agendas such as:-independence of the director, corporate restructuring, independent auditors, related party transactions and the like.

Considering governance concerns this proxy advisory firms have sometimes recommended against the administrations of the company. Like in the case of :-

The motive for the presence of Independent Directors (ID’s) was felt for meeting a strict framework of the corporate governance norms in the company. The need for the introduction of the concept of ID’s was to have someone take the independent and unbiased decisions solely bases on their skills and also to keep a check on the decisions taken by other decision making body of the company. Clause 49 of the listing agreement also talk about the presence of ID’s in the company. Companies Act 2013 has also drawn a distinction between ID’s and executive directors and their respective roles in the Companies governance policies. According to which the ID has to perform various duties and liabilities for better governance of the company. Along with various other duties he has to ensure that the minority shareholders interest is also being protected and there is no particular set of favor being offered to some set of shareholders and stakeholders. The role they play in the company includes instituting good corporate governance structure, improving credibility of the corporate, and the risk management of the company. These Independent directors are the guardian of the corporate governance of the company. The corporate governance structure hinges on the IDs, who are supposed to bring objectivity to the oversight function of the board and improve its effectiveness.

While its comes to the appointment of these independent Directors the investor have to cast their vote wisely because their wrong vote may affect the future of the company and also the shareholding of these shareholders themselves. These independent directors are appointed in the general meeting of the company. To use their vote in an efficient manner these shareholder or investors, they outsource their voting decisions to some independent research analyst or proxy advisory firm. Who in turn give their recommendations by analysis the various issue involved and the impact of the vote.

Recently two proxy advisory firms of India, IiAS and SeS being the advisory of the shareholders of the Infosys for their informed voting decisions has suggested in negative to vote for Prof Jeffery S Lehman as independent director of the company. The basis for suggesting against the appointment is the long association of the Prof Jeffery S Lehman with the company. The advisory firm has given the advice complying with the Companies Act, 2013. As they said "SES does not consider directors associated with the company for more than ten years to be independent,"

Therefore, suggested that the if company believes that the appointment of Prof Jeffery S Lehman would be beneficial than it should appoint him as non- Independent director.

Similarly, InGovern another proxy advisory firm in India as appointed by three companies to suggest on their voting decision has suggested voting against the appointment of ID in AGM. It suggested to vote against Wipro’s B.C Prabhakar as it ID, against Shardul Shroff as ID of IDFC, and against S.H Khan (former chairman of IDBI) as its ID. The firm has advised against the appointment of the ID’s because their long association with the company stating it almost like being married to the company and also to comply with S.E.B.I clause 49 of listing agreements.

This clearly shows that the recommendation of these advisory firms helps maintain good governance policies in the company. For example in the above mentioned cases these firms have analyzed the actual independence of the proposed independent director on behalf of the institutional investor as these institutional investor hold shares in so many companies and some investors are foreign institutional investor that they can’t investigate into the matters of every company in depth themselves. These firms also help shareholders and the company to comply with laws in force.

According to Section 197 of the companies Act, 2013 if any company wants to pay its managerial personnel’s any amount more than the maximum limit prescribed then it can only be done through shareholders resolution. If shareholders utilize this opportunity with caution then they can have a considerable amount of control on the remuneration packages of managerial personnels. Unfortunately, Shareholders are only the passive actors in such case. It is a very rare chance that any resolution regarding managerial compensation is rejected at the general meeting. One of the reasons is that even though there is disclosure of certain information regarding remuneration scheme yet shareholders do not have adequate knowledge to vote in an effective way thus they tend to go with the majority shareholders.

Proxy advisory Firms have brought a revolution in this aspect. They provide Institutional shareholders with adequate information which helps them to cast an informed vote. They also bring to light any ill practices happening in a particular company.

In a recent case relating Lavasa, Ajit Gulabchand who was drawing five times the salary sanctioned by the central government without any approval was made to refund the extra amount. His excessive remuneration was scrutinized by a proxy advisory firm who brought to light that, at the time when company was under huge debts the CEO was drawing excessive compensation.

Proxy advisory firms work as a watchdog against excessive remuneration. They keep a check on the compliance of the companies and also make companies align the remuneration of top managerial personnel’s to the performance of the company.

For the protection of the interest of the shareholders auditors and the auditing committee play an imperative role. As Satyam and the other like giant scams has declined the trust of the shareholder from the capital market that there occurs a need of the external and unbiased auditors to do the audit of the company. The duty of audit committee in the zone of corporate governance is to give affirmation that the corporation is consistent with rules and regulations in force, and is performing its duties and affairs in a fair and nice manner, and is keeping up successful controls against hidden wealth of the managerial body in avoiding corporate frauds.

An audit committee comprising independent directors can have control over administration and in this way going about as a kind of affirmation to the shareholders that they will have full disclosure of data which will affect their voting decisions. Section 139 to 148 of the Companies Act, 2013 deals with audit and audit committee. The proxy advisory firms have raised their concerns regarding auditor’s appointment in the company basing their arguments on the non-independence of these auditors. Proxy advisory firms have helped the domestic as well as foreign institutional investors in utilizing their votes in an efficient manner by providing the data regarding the implication and independence of the auditors for framing their voting decisions.

As recently in July 2015, a Proxy advisory firm Stakeholders Empowerment Services advised ITC to vote against the ratification of the appointment of Deloitte Haskins & Sells (DHS) as its statutory auditor. As the proposed auditor i.e. DHS and the leaving auditor (who has been the auditor of the ITC for 21 years) A. F Furguson & Co. share same network. Appoint of the auditors of same network is prohibited under Rule 6(3)(ii)of the Companies ( audit & auditors) Rules,2014. And also that, this ratification of appointment would amount to breach of section 139(2) of the Companies Act, 2013.

These are certain complication which the investor can’t look into himself and also being aware and well understood of all the present and upcoming laws is difficult for a domestic as well foreign investor. A proxy advisory firm may illuminate them with all this certainties.

These firms have also advised in the issues of merger, acquisitions and corporate restricting were there is likelihood of fading of the shareholdings of the investors.

Another positive role of these firms is that they enhance the habit of compliance with laws and corporate governance norms by giving their suggestion and themselves comply with the laws. By criticizing the structure and function of a company these firm spread the culture of following good governance practices making it a worldwide standard. As when they criticize a company for non-compliance or for any other corporate related aspects, it spread the world to general public and in entire capital market, which help others to learn from the mistake of the other. They basically monitor the companies to comply with corporate governance standards.

Proxy advisory firms are likewise advantageous to institutional investors in different ways. It is no more required for an institutional investor to spend time and money personally researching about their voting implications.

While the concept of proxy advisory firms is new to Indian investors creating shareholder activism it is important for these firms to learn from other countries providing themselves with better chances of success.

Influence of the minority shareholder including both the institutional and the retail can no more be ignored by the controllers and the management of the company. Proxy advisory firm throws light on proposal of the corporation and to stimulate to action minority shareholders to defeat shareholder indifference towards them and participate actively in the decision making practices if the company. Proxy advisory firm are there as to keep a check on the companies working and compliance with laws other governance practices.

There no such empirical study done in India to show the positive or negative compliance of the recommendations of the firms. A study conducted by Bethel, and Gillan in 2002 on the status of U.S proxy advisory firm shows that a negative recommendation from ISS (U.S Based) on the proposal of the management can persuade 13.6 % and 20.6 % of the vote. Another study done by Cai, Garner, and Walking in 2009 shows that a negative ISS recommendation can sway up to 19 % of the vote. Survey conducted by National Association of Securities Dealers Automated Quotations and the Stanford Rock Center for Corporate Governance, finds that 70% of executive officers and directors account that their compensation programs affected by the recommendations and the guidelines of the proxy advisory firms. There have been instances where it is found that the recommendations are in conflict with their own research or somehow contradict it. Various research result shows that firms recommendation on executive remuneration were value degrading.

SEBI on 1st September, 2014 issued (RESEARCH ANALYSTS) REGULATIONS, 2014. And (INVESTMENT ADVISERS) REGULATIONS, 2013 On 21st January, 2013.

The RA regulation talks about the eligibility norms, registrations, management of conflict of interest, disclosure requirement and other related aspects. The RA regulation consists of 34 Regulations and 3 schedules. Proxy advisory firms are defined under regulation 2 (i)(p) of the regulation. All the chapter of the act applies to them as well. Regulation 23 specifically deals with the disclosure needs to be made by the proxy advisory firms. Pension advisors, insurance broker, advocate, registered stock or sub broker, distributors of mutual funds, etc. are exempted for the registration to serve the above mentioned purpose of the Act.

The IA regulation 2013 also talks about eligibility norms, registrations, management of conflict of interest, disclosure requirement and other related aspects. It consist of VI chapters, 30 regulation and 3 schedules.

Credit Rating Agencies, asset management companies, Investment advisers, portfolio or manager fund managers of venture capital fund are exempted from the registration requirement under IA Regulation 2013.

The intention of the SEBI to regulate these market intermediaries by registering only those who have proper skills, experience and education on these areas is to improvise the quality of the recommendations being given to the institutional investors and shareholders.

Foreign entities doing research on Indian listed capital also required to undergo registration process.

SEBI has covered regulation regarding conflict of interest also. This situation arises when the advisors stand on both the end of the transaction.at one end they act for promoters of a company and at other end they also act for the shareholder or investor of the same company. This promulgates the chances of cheating on any one of the party. Particularly the one who pays less.

For instance, Promoter might offer 2% of share in his organization. Advisors working with him could put out purchase proposals on the stock to shore the share cost before the promoter offers. Additionally, often the analysts purchase a specific stock in their own record before prescribing it to their customers. To manage this "conflict of interest", SEBI has come up with new rules for research analyst and investment advisors. This intention here is to remove the loopholes in the existing regime which may lead to insider trading.

Although the concept of Proxy advisor is quite new to Indian corporate markets, there are certain concerns arising in every jurisdiction day by day. The functioning of these proxy advisory firms is under concerns. As the concept of outsourcing voting decision is quite new to India. There are certain global worries increasing day by day regarding these proxy advisory firms. Some of these issues are:-

This situation arises when the advisors stand on both the end of the transaction.at one end they act for promoters of a company and at other end they also act for the shareholder or investor of the same company. This promulgates the chances of cheating on any one of the party. Particularly and in most of the cases, the one who pays less. Through Research Analyst Regulation, 2014 SEBI has tried to overcome this issue up to a certain extent but more stringent regulation are required to completely eradicate the chances of conflict of interest.

Concerns have been raised against the methodology being used by these advisory firms for conducting their research and giving recommendations upon .These proxy Advisory Firms are globally criticized for their research procedure. As their methodology is so general and dose not focus upon the particularities and the circumstances of the company. These firms are often being alleged to follow ‘tick based’ or ‘free size fit’ mechanisms. This questions the accuracy of the research and the advice being given.

There are certain concerns regarding the accountability of the firms providing an un-fruitful advice to the company. What happens if investor suffers huge losses by complying with the recommendation of the advisory firms? Regulation needs to framed in such a manner that would compel these firms adopt the best mechanism avoiding chances of wrong advice being given and which leads these firms to do their research work in an handsome manner. These are issued which are being faced by at a global.

There may arise situation where one advisory firm recommends in positive to an agenda item and the other advices in negative. It will lead the investor toward the confusion and instead of helping him with his vote, leave him in crisis of decision that which recommendation to follow. Although the investor always has the choice of following the recommendation of the most popular firms but that would also not take him out of the confusion. This issue of advisory firms is also a global concern.

A proxy advisory service also involves the issue of transparency. To stand unbiased and independent these firms are supposed to disclose reasons for their recommendations and also that what practices they indulge into to reach such a conclusion. E.g. Glass Lewis a U.S based advisory firm which provides almost negligible amount of clarification as to their voting policies. Without referring to the criteria used by the firm for the recommendations, it becomes difficult for the investor to rely upon the recommendation of the firm.

Investments advisory were there in U.S since long. SEC i.e. Securities and Exchange Commission United States passed and Act for the regulation of these investment advisors i.e Investment Advisor Act of 1940 before 1974 majority of shareholder did not took their voting rights seriously and instead of understanding the complexities of agenda they often chose not to vote. ERISA i.e. Employee retirement income security Act of 1974 made plenty of efforts in changing the existing scenario. It requires that the pension plan should be voted upon more carefully and wisely. Slowly and steadily, institutional investors started taking up their votes seriously for the agenda item like- board’s appointment, executive remuneration etc. Since then they realized the value of their vote. But again it was still difficult for the investor to cast their vote in an efficient manner.

Taking the advantage of this problem one entrepreneur came forward with the concept of proxy advisory firms and established the first proxy advisory firm of U.S i.e. ISS in 1985. It took long way from the era of investment advisory in 1940’s to the era of proxy advisory firm. although investment advisories were there in U.S much before proxy advisories came into existence but it was there at an dormant phase because at that point of time capital business were not much popular and only well-educated and well to do people used to buy securities. After ISS many other advisory firms came into existence like Glass Lewis, Egan Jones, etc.

Suggestions for directing the proxy advisory industry are under dynamic attention in Europe, the United States and Canada. SEC in U.S has always been at controlling stake for these advisory businesses, and it has proposed a new bill dealing with the reforms of proxy advisory services of 2016. This bill has proposed to provide more value to the services of these firms and will increase the transparency aspect of these firms. Bill includes provision for Registration, disclosure of procedure & methodology, organizational structure, code of ethics, etc.

The major changes to be made as against the earlier Act is that, now the bill provides the right of review to the corporation before the firm makes any advice to the investor. If the right of the investor is being infringed them they may approach court of law. Another major step is the inclusion of internal control officer. It took U.S a long way to realize all these issues involved with the advisory services. But hopes are in positive for the new bill. India may also learn from the mistake of the U.S may resolve it before it goes uncontrollable.

The author here has willfully not discussed the history and the issues of advisory services in U.S as issue these issues discussed above and are same across the globe. With U.S scenario author has tried to focus on what India needs to learn from the continuous emerging trend abroad.

Conclusion
Since the concept of proxy advisory is quite new for India and is developing rapidly it would be very early to give judgment on its positive or negative impact. Although an inference can be drawn based on the cases discussed in the above chapters that even at its nascent stage Indian proxy advisory firms are handing best in keeping up investor voting decisions. These firms are keeping pace with the existing laws and are very effective in maintaining global corporate governance compliance.

Same as there are no virtue without the vices; proxy advisory firms have also some vices (issues) such as adoption of improper method or a general method for every company. The regulatory authorities should issue some standardized procedure with which these firms have to comply with. But these standardized should not be stringent in nature otherwise it would be like and obstruction for these firms.

The issue of clash of suggestion is actually not an issue, as it is solely on the discretion of the investor that with whose recommendation he wants to comply with. In such and scenarios investors always have the chance of choosing the most popular advisory one. Same as clash of suggestion issue of accountability is also not a proper issue because its investor personal choice to appoint and institutional investor instead of doing the research work himself for his vote. One cannot expect from anyone, however skilled or experienced that his say would always lead to profit. By this, author does not mean to say that the issue should not be looked at. Stringent regulations should obviously be made so that these firms do not become just a profit earning entities and overlook their main objective. But expecting from them 100% result would also not be fair.

SEBI’s new regulation of 2014 and 2013 in regards to Research analyst and investment advisor respectively are very comprehensive covering all possible issues. But being at its nascent stage, this industry requires much more attention of the authorities to showcase these firms their obligations and curb out the risk involved in their advices. This would keep up phenomenal benchmarks in the business. Such a compulsory system would similarly help SEBI screen the activities of the organizations, and also to rebuff them by method for approvals in the event of resistance. This would also resemble to the regulations of credit rating agencies, whereby SEBI has been effective in keeping up standards of Indian business.But such attentions of the authorities should not act as a barrier to entry of new players.

An overall analysis of the role of the proxy advisory firms shows that the recommendations given by these firms lead to compliance with the laws and with corporate governance norms as well. If these firms will work leaving behind their conflict of interest there are chance that they may reveal chances of future scams and will promote good governance also.

Books
· Robert A.G Monks, Neil Minow- Corporate Governance, Dec-2003
· United States. Congress. House. Committee on Financial Services. Subcommittee on Capital Markets and Government Sponsored Enterprises ,”Examining the Market Power and Impact of Proxy Advisory Firms”-2013

Websites
· http://www.startribune.com/proxy-advisers-face-challenge-from-corporate-critics/233874011/
· https://www.issgovernance.com/about/iss-history/
· http://www.theactivistinvestor.com/The_Activist_Investor/Proxy_Advisors.html
· http://www.thehindubusinessline.com/opinion/columns/aarati-krishnan/when-governance-is-outsourced/article3757953.ece
· http://indianboards.com/files/clause_49.pdf

Articles
· Varrotil, Umakant. "The advent of shareholder activism India." Journal on Governance (2012).
· Paul Rose, On the Role and Regulation of Proxy Advisors, Michigan Law Review: First Impressions
· Jennifer E. Bethel and Stuart L. Gillan, “The Impact of Institutional and Regulatory Environment on Shareholder Voting,” Financial Management (2002).
· Jie Cai, Jacqueline J. Garner, and Ralph A. Walking, “Electing Directors,” Journal of Finance (2009)
· The Conference Board, NASDAQ, and Stanford Rock Center for Corporate Governance, “The Influence of Proxy Advisory Firm Voting Recommendations on Say-on-Pay Votes and Executive Compensation Decisions,” (2012). Available at: http://www.gsb.stanford. edu/cldr/research/surveys/proxy.html
· David F. Larcker, Allan L. McCall, and Gaizka Ormazabal, “The Economic Consequences of Proxy Advisory Say-on-Pay Voting Policies,” Rock Center for Corporate Governance at Stanford University working paper (May 2012). Available at: http://ssrn.com/ abstract=2101453
· David F. Larcker, Allan L. McCall, and Brian Tayan, “And Then a miracle happens!: How do proxy advisory firms develop their voting recommendations” February 25, 2013
· European Commission, Green Paper: The EU corporate governance framework (2011), available at http://ec.europa.eu/internal_market/company/docs/modern/ com2011-164_en.pdf; ESMA Paper
· Mary L. Schapiro, Remarks to the CorporateCounsel.Net, Say-on-Pay Workshop Conference (Nov. 2, 2011), available at http://sec.gov/news /speech/2011/spch110211mls.htm
· European Securities and Markets Authority, Discussion Paper: An Overview of the Proxy Advisory Industry, Considerations on Possible Policy Options 22, ESMA 2012/212 (Mar. 22, 2012)
· Vandana Gupta, R.K. Mittal & V.K. Bhalla, Role of the credit rating agencies in the financial market crisis, 2 J. DEV. AGRIC. ECON. 286 (2010).

Periodicals
N Sundaresha Subramanian & Raghu Balakrishnan, Small shareholders on collision course with PEs in Manappuram, BUSINESS STANDARD, July 27, 2012
Aarefa Johari, Lavasa head was made to return his excess salary, but most Indian CEOs enjoy massive wages,( May 09, 2015 , 08:45 am),
Varun Sood, Proxy advisory firms take on infosys over board appointment,live mint, Wed, Mar 23 2016. 02 33 AM IST
Sucheta Dalal, Proxy advice: Check on misgovernance, MONEYLIFE, August 11, 2011
Bhuma Srivastava, Proxy advisory firms give a boost to shareholder activism, THE MINT, June 29, 2012;
Naren Karunakaran, Proxy firms wade through proposed resolutions, THE ECONOMIC TIMES, November 29, 2011
Bhuma Srivastava, Proxy advisory firms give a boost to shareholder activism, THE MINT, June 29, 2012;

Footer
# Securities and Exchange Board of India, Circular for Mutual Funds, SEBI/IMD/CIR No 18 / 198647/2010 (Mar. 15, 2010) [hereinafter the SEBI Circular for Mutual Funds].
# Bhuma Srivastava, Proxy advisory firms give a boost to shareholder activism, THE MINT, June 29, 2012; Naren Karunakaran, Proxy firms wade through proposed resolutions, THE ECONOMIC TIMES, November 29, 2011
# http://indianboards.com/files/clause_49.pdf
# Bhuma Srivastava, Proxy advisory firms give a boost to shareholder activism, THE MINT, June 29, 2012;
# They are (i) In Govern (http://www.ingovern.com/); (ii) Institutional Investor Advisory Services (IIAS) (http://www.iias.in/); and (iii) Stakeholders Empowerment Services (SES) (http://www.sesgovernance.com/index.html).
# Supra note 2
# Supra note 3
# See Section 149 (6) of the companies Act, 2013
# Refer section Section 96 of the Companies Act , 2013
# Varun Sood, Proxy advisory firms take on infosys over board appointment,live mint, Wed, Mar 23 2016. 02 33 AM IST
# Sucheta Dalal, Proxy advice: Check on misgovernance, MONEYLIFE, August 11, 2011
# Section 197-Overall maximum managerial remuneration and managerial remuneration in case of absence or inadequacy of profits—

(1) The total managerial remuneration payable by a public company, to its directors,including managing director and whole-time director, and its manager in respect of any financial year shall not exceed eleven per cent. of the net profits of that company for that financial year computed in the manner laid down in section 198 except that the remuneration of the directors shall not be deducted from the gross profits:

Provided that the company in general meeting may, with the approval of the Central Government, authorise the payment of remuneration exceeding eleven per cent. of the net profits of the company, subject to the provisions of Schedule V:

Provided further that, except with the approval of the company in general meeting,—

(i) the remuneration payable to any one managing director; or whole-time director or manager shall not exceed five per cent. of the net profits of the company and if there is more than one such director remuneration shall not exceed ten per cent. of the net profits to all such directors and manager taken together;

(ii) the remuneration payable to directors who are neither managing directors nor whole-time directors shall not exceed,—

(A) one per cent. of the net profits of the company, if there is a managing or whole-time director or manager;

(B) three per cent. of the net profits in any other case

# Aarefa Johari, Lavasa head was made to return his excess salary, but most Indian CEOs enjoy massive wages,( May 09, 2015 , 08:45 am), http://scroll.in/article/725378/lavasa-head-was-made-to-return-his-excess-salary-but-most-indian-ceos-enjoy-massive-wages
# (ii) the incoming auditor or audit firm shall not be eligible if such auditor or audit firm is associated with the outgoing auditor or audit firm under the same network of audit firms. Explanation. I - For the purposes of these rules the term “same network” includes the firms operating or functioning, hitherto or in future, under the same brand name, trade name or common control.
# Supra note 3,5
# Paul Rose, On the Role and Regulation of Proxy Advisors, MICHIGAN LAW REVIEW: FIRST IMPRESSIONS, available at http://www.michiganlawreview.org /articles/on-the-role-and-regulation-of-proxy-advisors.
# Jennifer E. Bethel and Stuart L. Gillan, “The Impact of Institutional and Regulatory Environment on Shareholder Voting,” Financial Management (2002).
# Jie Cai, Jacqueline J. Garner, and Ralph A. Walking, “Electing Directors,” Journal of Finance (2009).
# The Conference Board, NASDAQ, and Stanford Rock Center for Corporate Governance, “The Influence of Proxy Advisory Firm Voting Recommendations on Say-on-Pay Votes and Executive Compensation Decisions,” (2012). Available at: http://www.gsb.stanford. edu/cldr/research/surveys/proxy.html
# David F. Larcker, Allan L. McCall, and Gaizka Ormazabal, “The Economic Consequences of Proxy Advisory Say-on-Pay Voting Policies,” Rock Center for Corporate Governance at Stanford University working paper (May 2012). Available at: http://ssrn.com/ abstract=2101453
# "proxy adviser” means any person who provide advice, through any means, to institutional investor or shareholder of a company, in relation to exercise of their rights in the company including recommendations on public offer or voting recommendation on agenda items
# N Sundaresha Subramanian & Raghu Balakrishnan, Small shareholders on collision course with PEs in Manappuram, BUSINESS STANDARD, July 27, 2012
# David F. Larcker, Allan L. McCall, and Brian Tayan, “And Then a miracle happens!: How do proxy advisory firms develop their voting recommendations” February 25, 2013
# European Commission, Green Paper: The EU corporate governance framework (2011), available at http://ec.europa.eu/internal_market/company/docs/modern/ com2011-164_en.pdf; ESMA Paper
# Mary L. Schapiro, Remarks to the CorporateCounsel.Net, Say-on-Pay Workshop Conference (Nov. 2, 2011), available at http://sec.gov/news /speech/2011/spch110211mls.htm
# Canadian Securities Administrators, Potential Regulation of Proxy Advisory Firms, Consultation Paper 25-401 (Jun. 21, 2012), available at http://www.osc.gov.on.ca/en/SecuritiesLaw_csa_20120621_25-401_proxy-advisory-firms.htm.
# http://financialservices.house.gov/uploadedfiles/bills-114-pafra-pih.pdf
# European Securities and Markets Authority, Discussion Paper: An Overview of the Proxy Advisory Industry, Considerations on Possible Policy Options 22, ESMA 2012/212 (Mar. 22, 2012)
# Vandana Gupta, R.K. Mittal & V.K. Bhalla, Role of the credit rating agencies in the financial market crisis, 2 J. DEV. AGRIC. ECON. 286 (2010).

ISBN No: 978-81-928510-1-3
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