17 - Shareholder Stewardship in India

Summary

The goal of this chapter is to examine whether the stewardship code, which emanated in circumstances that are specific to the United Kingdom (UK), is capable of transposition to jurisdictions such as India that experience different corporate structures as well as legal and institutional mechanisms. This paper cautions against the wholesale adoption of a UK-style stewardship code in India due to the specific factors that are at play in that jurisdiction. At least three reasons necessitate such an approach. First, while the prominence of institutional investors in the UK in the context of companies with dispersed ownership inspired the UK-style stewardship code, the roles and challenges that institutional investors experience in India in the context of concentrated shareholding are considerably different. Second, the goals of stewardship vary from the UK, where the focus is on the long-term financial sustainability of beneficiaries of institutional investors, to India, which follows a pluralistic stakeholder approach to corporate law. Third, the traditional mode in the UK of using a code-based soft law approach to implementation of stewardship is unsuitable to the Indian circumstances that steadfastly rely on mandatory rules in the form of hard law in the corporate arena.