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SBI Funds Management Private Limited

PRI reporting framework 2020

You are in Direct - Listed Equity Active Ownership » (Proxy) voting and shareholder resolutions

(Proxy) voting and shareholder resolutions

LEA 12. Typical approach to (proxy) voting decisions

12.1. Indicate how you typically make your (proxy) voting decisions.

Approach

Based on

12.2. Provide an overview of how you ensure that your agreed-upon voting policy is adhered to, giving details of your approach when exceptions to the policy are made.

SBIFMPL considers voting to be an important shareholder right and a valuable tool in the engagement process and endeavours to vote on all board resolutions of investee companies, which are critical for protecting and enhancing the investors' interests. Although, the AMC uses proxy voting advisory services from reputed service providers to help analyse company proxy materials and statements, all votes are confirmed in house by the analyst team, in discussion with the portfolio manager/s. These voting decisions and the process undertaken to arrive at the decision is uploaded on the AMC's website.

SBIFMPL has adopted general guidelines for voting proxies which are documented in our Proxy Voting Policy available on our website. Corporate Governance issues are various and continuously evolving. The guideline set are not and cannot be a comprehensive survey of the proxy voting guidelines as all kinds of issues cannot be anticipated. Therefore, the guidelines rather reflect some of the principles that are generally supported by the AMC. However, the AMC may exercise its discretion and act accordingly in some instances when it determines that based on the facts, it is in the best interest of the fund as a shareholder. Once the proxy advisers submit their decisions and the supporting reasons, the investment team analysts study them and provide their inputs on the actual condition of the company and digressing views (if any). The analysts refer to the Guidelines while making any kind of recommendations on the voting decisions. Our proxy advisers have a set methodology, which has been previously discussed with them and is largely aligned with the principles SBIFMPL believes in. Their methodology is publicly available and all the reasons for a particular recommendation are provided by the proxy advisor. In case, SBIFMPL does not agree with any recommendation, we ask for additional details, peer-comparison etc. from the service provider.

At times, we may see a need for making an exception. In such cases, we identify if there is a need to make changes in the proxy voting policy. The exceptions are never made ad-hoc, but are rather principle based, and corresponding changes are made in the Policy to make the framework more robust. The decisions are never based on importance of the company, analyst bias, or in order to accommodate a company. While making an exception, detailed discussions are conducted with the Chief Investment Officer and Head of Research. The resultant recommendations are then sent to the Proxy Voting Committee.

 

12.3. Additional information.[Optional]


LEA 13. Percentage of voting recommendations reviewed (Not Applicable)


LEA 14. Securities lending programme (Not Completed)


LEA 15. Informing companies of the rationale of abstaining/voting against management

15.1. Indicate the proportion of votes participated in within the reporting year in which where you or the service providers acting on your behalf raised concerns with companies ahead of voting.

15.2. Indicate the reasons for raising your concerns with these companies ahead of voting.

15.3. Additional information. [Optional]


LEA 16. Informing companies of the rationale of abstaining/voting against management

16.1. Indicate the proportion of votes where you, and/or the service provider(s) acting on your behalf, communicated the rationale to companies for abstaining or voting against management recommendations. Indicate this as a percentage out of all eligible votes.

16.2. Indicate the reasons why your organisation would communicate to companies, the rationale for abstaining or voting against management recommendations.

16.3. In cases where your organisation does communicate the rationale for abstaining or voting against management recommendations, indicate whether this rationale is made public.

16.4. Additional information. [Optional]


LEA 17. Percentage of (proxy) votes cast

17.1. For listed equities in which you or your service provider have the mandate to issue (proxy) voting instructions, indicate the percentage of votes cast during the reporting year.

Votes cast (to the nearest 1%)

91 %

Specify the basis on which this percentage is calculated

17.2. Explain your reason(s) for not voting on certain holdings

17.3. Additional information. [Optional]


LEA 18. Proportion of ballot items that were for/against/abstentions

18.1. Indicate whether you track the voting instructions that you or your service provider on your behalf have issued.

18.2. Of the voting instructions that you and/or third parties on your behalf have issued, indicate the proportion of ballot items that were:

Voting instructions
Breakdown as percentage of votes cast
For (supporting) management recommendations
80 %
Against (opposing) management recommendations
11 %
Abstentions
9 %
100%

18.3. In cases where your organisation voted against management recommendations, indicate the percentage of companies which you have engaged.

75

18.4. Additional information. [Optional]

IMPORTANT NOTE: We have referred to the voting data from March 2019 to December 2019. Voting data for current financial quarter (Jan to Mar 2020) is not yet available in the public domain)


LEA 19. Proportion of ballot items that were for/against/abstentions

19.1. Indicate whether your organisation has a formal escalation strategy following unsuccessful voting.

19.3. Additional information. [Optional]

While we do not have a formal escalation strategy following unsuccessful voting, we do have a policy on intervention, which includes escalation as a measure of intervention. This is mentioned in our Stewardship Code available on our website:

  1. Engagement: Sending letters to individual investee companies, one-to-one meetings with the management team, engagement with specific teams etc. to resolve any concerns including steps to be taken to mitigate such concerns.
  2. Re-Engagement: In the event the management of the investee company fails to undertake constructive steps to resolve the concerns raised by SBIFMPL within a reasonable timeframe, the AMC shall take all reasonable steps to re-engage with the management to resolve its concerns.
  3. Collaboration: The AMC shall also consider collaboration with other institutional investors, professional associations like AMFI, regulators, and any other entities it deems necessary for a collective engagement or joint representation with the investee company.
  4. Escalation: In case there is no progress despite the above three steps, SBIFMPL may engage with the Board of the investee company (through a formal written communication) and elaborate on the concerns. Further, the AMC may take appropriate steps to resolve the concerns including exiting its investments.
  5. Voting: SBIFMPL will vote against or abstain from voting in case the governance practices of the investee company are improper.
  6. Legal Recourse: SBIFMPL may take a legal recourse against a company if deemed necessary instead of exiting its investment.
  7. Blanket Bans: SBIFMPL may consider extending a blanket ban on a section of companies or create a list of black-listed companies as required if there is no engagement or improvement from the companies’ side. 

LEA 20. Shareholder resolutions

20.1. Indicate whether your organisation, directly or through a service provider, filed or co-filed any ESG shareholder resolutions during the reporting year.

20.7. Additional information. [Optional]


LEA 21. Examples of (proxy) voting activities

21.1. Provide examples of the (proxy) voting activities that your organisation and/or service provider carried out during the reporting year.

ESG Topic
Other governance
Conducted by
Objectives

The proposal was to vote regarding continuation of a Board Member on the board who had already been on the board for 24 years. SBIFMPL Voted Against.

Scope and Process

The Board Member for whose continuation on board, the resolution was submitted, was 86 years old, a Solicitor and Advocate. He had been on the board for about 24 years. Recent changes in SEBI’s LODR require directors having attained the age of 75 to be re-approved by shareholders through a special resolution. In line with this regulatory change, his directorship as Independent Director required shareholder ratification. SBIFMPL believed that the length of tenure is inversely proportionate to the independence of a director. We classified him as non-independent due to his long association with the company. If the company believed that it would benefit from his serving on the board, it must propose his continuation as a Non-Executive Non-Independent Director. 

Outcomes
ESG Topic
Executive Remuneration
Conducted by
Objectives

Voting Resolution to Re-appoint an individual as the Managing Director for a period of 5 years from 10th October, 2019 and fix his remuneration. SBIFMPL Voted For.

Scope and Process

The Individual in question belonged to the promoter group. While the absolute remuneration as compared to peers was at a higher-level a) profits increased 54% versus a 45% increase in remuneration b) remuneration was at 3% of profits and hence at acceptable levels c) most importantly a large part of remuneration was variable in nature. Hence, we voted for the resolution in coherence with our pay framework.

Outcomes

21.2. Additional information. [Optional]


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