The Indian Express Analysis - 9th August 2018

Table of Contents

Simply put: Contested words of advice

US-based global proxy advisory firms

Institutional Shareholder Services (ISS)
Glass Lewis

Recently they advised big institutional investors to vote against re- election of HDFC board members

In India 3 Proxy Firms:-

InGovern
Stakeholders Empowerment Services
Institutional Investors Advisory Services (IiAS)

Who are proxy firms or institutional advisory firms?

SEBI has defined a proxy adviser as any person who provides advice to institutional investors or a shareholder of a company, in relation to the exercise of their rights in the company, including recommendations on public offer or voting recommendation on agenda items.

Proxy advisory firms research and dig out information about the company, who may have invested in hundreds of companies, and don’t have detailed information on all of them — to vote on resolutions put to vote by managements in AGMs.

What happened at the HDFC AGM?

ISS and Glass Lewis, which control about 97% of the proxy advisory industry in the US, advised against the re-election of former RBI Governor Bimal Jalan, chartered accountant Bansi Mehta, and

Deepak Parekh – because of multiple reasons . American firms and a domestic firm had advised investors to vote against, and that they would not be able to secure the required 75% of votes.

How are proxy firms regulated?

Domestic proxy advisory firms are regulated by SEBI Proxy adviser is required to maintain the record of voting recommendations and furnish the same to the SEBI on request Foreign proxy advisory firms are not regulated in India

What is the criticism of foreign proxy advisory firms in India?

concentration of voting through global proxy advisory services, leading to concentration of voting power in the hands of a few global agencies.

What is the outlook towards these firms in the US?

There is a push for legislation to bring them under regulation and to register them with the US Securities and Exchange Commission Glass Lewis has said the proposed law shows a lack of understanding of how proxy advisory firms develop their research and recommendations

The New York Stock Exchange and Nasdaq have been pushing for reforms at privately-owned proxy firms. shareholder activist groups say that these firms play an important role in the corporate governance ecosystem.

The nuances of 35A

What is Article 35A?

A provision incorporated in the Constitution, giving the Jammu and Kashmir Legislature a carte blanche to decide who all are ‘permanent residents’ of the State and confer on them special rights and privileges in public sector jobs, acquisition of property in the State, scholarships and other public aid and welfare.

The provision mandates that no act of the legislature coming under it can be challenged for violating the Constitution or any other law of the land.

It was incorporated into the Constitution in 1954 by an order of the then President Rajendra Prasad on the advice of the Jawaharlal Nehru Cabinet. (Article 368!!??)

▪ The political legitimacy of the Indian state in Kashmir hangs on a very slender thread.

▪ This thread is the legitimacy of the Instrument of Accession, and the negotiations with Sheikh Abdullah in 1949, which led to the adoption of Article 370.

▪ Indian state has a long record of betrayal of promises, democratic values and trust.

▪ Abrogating 35A under the circumstances would be playing with fire

▪ Essentially laws governing Jammu & Kashmir are part of a political settlement.

▪ It is essentially up to the political process to modify the terms of the settlement, not to look to judges to short-circuit what should be a political negotiation.

▪ Politics must fix what politics broke

▪ Removing discrimination between Residents and non-residents – would not only invalidate 35A with respect to Kashmir, but also with respect to several other states including Mizoram, Nagaland and Himachal.

▪ Under some circumstances, restrictions may be introduced to protect local cultural preponderance → This is the principle behind asymmetric federalism.

▪ Why should we worry about Assam’s demography being altered, if we are willing to alter Kashmir demography??

▪ Honouring treaties and political settlement

▪ Blanket exemptions to states: Does the exercise of this power come with no constraints, no requirement that they meet basic standards like Articles 14 or 21?

▪ The challenge with identity-based exemptions is they often give carte blanche to local authorities to persist with discriminatory practices

▪ Goes against principles of natural justice, denying long-standing residents rights. ‘’Special status” seems not like a recipe for peace, but a deadly joke all sides want to play.

So while there is a powerful historical, legal and political argument for not abrogating 35A, it also behoves us to think beyond the cul-de-sacs in which we are stuck.

Behove = duty or responsibility for someone to do something. cul-de-sac = street or passage closed at one end

The Upward Push

▪ India’s Economic growth rate at around 7 per cent

▪ Inflation rate is just below 5 percent

▪ Interest rate at around 7 per cent

▪ RBI Increased Repo rate & Reverse repo rate

▪ Monsoon was below normal with an evolving El Nino

▪ The MSP increase was moderately good (50%)

▪ 50 per cent increase in → paid out costs + family labour.

▪ But that meant rental and capital charges were excluded.

▪ Industrial and corporate sector is allowed to keep unearned incomes carrying scarcity returns

▪ M S Swaminathan had in his Farmers Commission used to recommend a more inclusive cost formula.

▪ Investment level is falling

▪ The real issue is whether India can raise investment levels back to around 34 per cent of GDP, which the Niti Aayog has been wanting.

▪ The delayed monsoon and the spike in food prices necessitated that the interest rate is kept high

▪ Manufacturing sector has been showing a reasonable rate of growth

▪ Public investment shares have fallen more

Conclusion :-

▪ India Need to Be increase in infrastructure spending by raising fixed capital formation in the public sector

▪ India needs to reinforce faith in the competitiveness of labour

intensive Indian exports and skills that underline them.

▪ Important issue is nudging the macro economy upwards.

To bee or not to bee

NOT all bees are Not honey bees.

Honey bee Genus – Apis

Indian bee species –

Apis Dorsata

Apis Florea

Apis Cerana

Apis Mellifera

Apiculture = beekeeping

मधुमक्खी पालन

Bees have a significant role as pollinators
As bee products – pollen, propolis, royal jelly, wax and venom.

Honey yield –

Dorsata will yield 50-80 kg
Mellifera 25-40 kg
Cerana Indica has been around for hundreds of years, particularly

in the southern parts, though a viral disease in 1991 wiped out many

colonies

✓ Mellifera is not indigenous

✓ It was “imported” in the 1960s in Punjab

✓ Mellifera is less aggressive and more domesticated than Dorsata.

Cerana Indica popular in the south instead of Mellifera?

Bee-eater bird eats bees, and also wasps and other flying insects
Mellifera flies straight, Cerana indica’s flight path is up and down, not straight.

Apiculture is still informal and unorganised.

A ballpark figure is production of 95 thousand metric tonnes and

export of 45 thousand metric tonnes.

According to Prevention of Food Adulteration Rules (1955),

“Honey means natural sweet substance produced by honey bees from the nectar of blossoms or from secretions of plants which honey bees collect, transform, store in honeycombs for,ripening”.

contaminants, adulterants, insecticides and pesticides?