How LIC voted on Reliance, Adani resolutions — and how it differed from others

This raises questions of how decisions are made at the country's largest money manager and whether it has different voting standards for businesses controlled by the country’s wealthiest tycoons versus other companies, experts said.

LIC, as the largest public shareholder in RIL and Jio Financial Services, approved all 63 shareholder resolutions put forth by the two companies over the last 14 quarters, a period when it rejected or abstained from voting on similar proposals at other firms.

At Adani-owned companies, LIC approved 351 of 368 resolutions and abstained from voting on the remaining 17. It didn’t reject a single Adani Group shareholder resolution even as it rejected comparable proposals more frequently at non-conglomerate companies.

There have been at least five instances with RIL, India's most valued company, where LIC’s voting has raised questions about inconsistencies in its policy. The insurer holds a 6.94% stake in the refining-to-retail giant valued at around ₹1.47 trillion as of Wednesday and accounting for nearly 3% of its assets, Mint calculations show.

None of the other large Indian conglomerates have received complete approval for all their shareholder resolutions from LIC during this time.

In all, of the about 9,000 resolutions since the beginning of FY23, LIC voted in favour of over 92% of them and abstained from voting on another 6%. It rejected just under 2% of the resolutions.

The insurer owns more than 1% stake in over 300 companies as per a review of its voting disclosures.

LIC's voting record highlights a potential risk: inconsistent standards, as detailed in this story, have an impact on how the insurer manages its ₹57.23 trillion ($645 billion) in assets under management as of September. The fiduciary duty it has to its crores of policy holders and investors whose money it invests in stocks, mutual funds, and government securities is detailed in its ‘stewardship code’.

Among other goals, the code states: “Stewardship aims to promote the long-term success of investee companies in such a way that the ultimate providers of capital also prosper. Effective stewardship benefits investee companies, investors and enhances the quality of capital markets."

At least on one occasion, there was a violation of the guidelines laid out in LIC's voting policy document regarding discipline at its investee companies. This was on the approval of the fiscal 2025 standalone and consolidated accounts of Adani Enterprises and is detailed later in this story.

Mint had sent LIC questions on this story more than a week ago on 20 November and had not received any response at the time of publishing. After publication of the story online Thursday morning and in print Friday morning, a communications agency responded on behalf of LIC.

“Corporate governance and voting issues are diverse and constantly evolving and LIC always believes and follows good corporate governance in taking an informed stand on such voting issues, without any element of favour or bias," the response read.

“Our voting decisions are based on our Internal Voting Guidelines and LIC always takes a considered view while voting on resolutions of companies on the basis of our voting policy and other available information," it continued, adding it seeks clarifications from companies at times.

LIC takes into account “factors such as overall economic and strategic considerations, our holding in the companies and our stakeholders’ interest at large, before taking a voting decision," it said.

RIL and Adani did not respond to emails seeking comment sent on Monday, 24 November.

Ambani reappointment

More than two years ago, in August 2023, LIC voted in favour of the reappointment of Mukesh Ambani as RIL’s managing director. Ambani is also the company's chairperson.

But this March, LIC abstained from voting on Venu Srinivasan’s re-appointment as chairman emeritus and managing director of TVS Motor Company, stating only that the abstention was "as per our internal guidelines", without elaborating.

The separation of the roles of chairperson and managing director or chief executive officer is a sound governance practice adopted by leading institutional investors. Even the markets regulator, the Securities and Exchange Board of India, has recommended that the top 500 listed companies by market capitalization should consider separating these two positions, although it has not made it mandatory.

“If LIC votes against the recommendations of the regulator, how can anyone else take these matters seriously," asked Sharmila Gopinath, an independent corporate governance consultant.

Three other instances highlight the inconsistency in how the insurer votes on governance matters across the more than 300 listed companies in which it is a shareholder:

In June 2024, when RIL sought shareholder approval to ratify the appointment of prominent lawyer Haigreve Khaitan as an independent director on its board, LIC voted in favour. According to public records, Khaitan currently sits on the boards of eight companies.

Soon after, in August 2024, however, LIC abstained from voting on the re-appointment of independent director Rajeev Gupta to the board of Indian Energy Exchange Ltd, citing that Gupta had “excessive time commitments", according to voting disclosures made by the insurer. Gupta sits on the boards of nine companies.

Oddly, in the same week, LIC approved the appointment of Gupta as an independent director on the board of Pidilite Industries Ltd.

Different approaches

The inconsistency doesn’t end there.

LIC abstained from voting on ratifying the appointments of other independent directors, too, due to concerns about over-commitment — some of them at large companies. These include the appointment of Pallavi Bakhru (eight directorships currently) to the board of Hindustan Zinc Ltd in October 2023, Anami Roy (11 directorships) to the board of Bajaj Finserv Ltd in December 2023, and Arvind Newar (20 directorships) to the board of HGI Industries Ltd in September 2024. The Aditya Birla Group owns HGI Industries.

At the same shareholder meeting where LIC approved of Khaitan’s appointment on the RIL board last June, it also ratified the reappointment of Yasir Othman H. Al Rumayyan as an independent director. The chairperson of Saudi Aramco attended five of the seven board meetings in the preceding year, below the 75% attendance threshold set by most proxy advisory firms. Proxy advisory firms, including Institutional Investor Advisory Services (IiAS), and marquee global fund managers such as Norges and Vanguard, opposed his reappointment due to his low attendance.

“Board members should contribute to effective discussions and decision-making by attending all meetings," Norway’s sovereign wealth fund, Norges, reasoned.

LIC did not challenge Al Rumayyan's low attendance.

In contrast, over two years, LIC opposed three director re-appointments and abstained from voting on two others due to poor attendance. The rejections were at Page Industries Ltd and Lux Industries Ltd, while the abstentions were at Titan Company Ltd and Torrent Power Ltd.

While these directors had attended fewer than half the board meetings in the preceding year, LIC did not clarify why poor attendance merited different actions at different companies.

Adani decisions

The inconsistencies in LIC’s voting patterns extend to the Adani Group, controlled by billionaire Gautam Adani, as well. LIC is the largest public shareholder in six of the seven Adani-owned companies, including Adani Enterprises, Adani Ports and Special Economic Zone, Adani Energy Solutions, Adani Total Gas, Adani Green Energy, ACC, and Ambuja Cement.

In June last year, Adani Enterprises sought shareholder approval to reappoint Gautam Adani's brother Rajesh Adani as managing director for five years and to fix his remuneration. The flagship company of the Adani Group also sought shareholders' nod to reappoint Pranav Adani, a nephew of the group chairman, as executive director for five years and to fix his remuneration. LIC abstained from voting on both the resolutions, noting that they were “compliant with law but no absolute cap on variable pay", according to its disclosures.

Around the same time, Coromandel International Ltd proposed two resolutions: to appoint the late Arunachalam Vellayan as a director and fix his remuneration and to appoint Narayanan Vellayan as executive director and fix his remuneration. (The former passed away on 17 November this year.) LIC voted against both the resolutions at the Murugappa Group-owned company citing “governance concern. No absolute cap on variable pay".

The insurer did not clarify why these concerns led to a rejection in the Coromandel instance, whereas similar concerns at Adani Enterprises led to abstention rather than a vote against.

There were other similar rejections as well. In June this year, LIC opposed Bajaj Finance Ltd's two resolutions: the reappointment of Rajeev Jain as executive director and re-designation of Anup Saha as managing director. "No cap on remuneration. Absence of performance metrics determining variable pay. Lack of clarity on stock options to be issued," LIC reasoned when it rejected both the resolutions.

While abstaining from voting on a proposal doesn’t equate to giving it a thumbs up, it also falls short of being an outright opposition to it, according to two corporate governance experts. It typically means that LIC doesn’t fully approve of the resolution, but it will still let it pass.

“When a large institutional shareholder like LIC abstains from voting on a resolution, it sends a message to the company management that they are not happy with the proposal without derailing it," said Shriram Subramanian, the managing director of proxy advisory firm InGovern and an expert on corporate governance.

Resolutions in contrast

In June 2024, when Adani Gas sought approval to appoint Mukesh M. Shah as an independent director, LIC abstained from voting citing “lack of clarity about the tenure of association of the Director with the group companies".

Shah’s neutrality was questioned in January 2023 by the now shuttered short-seller Hindenburg and investors, as he is the founder and managing partner of Mukesh M Shah and Co., which serves as the auditor of Adicorp Enterprises, an Ahmedabad-based, privately held firm that has been involved in complex transactions, including lending ₹608.5 crore to Adani Power Ltd.

This June, RIL sought to appoint Dinesh Kanabar as an independent director for a term of five years. Proxy advisory firm IiAS objected to this appointment, citing a conflict of interest: Kanabar heads Dhruva Advisors, which is an auditor for several Reliance group firms.

LIC approved the appointment of Kanabar at RIL, despite proxy advisor objections regarding a conflict of interest.

The abstention at Adani Gas and the approval at RIL are in sharp contrast with LIC's rejection of the re-appointment of late Piyush Pandey as an independent director at Pidilite Industries in June 2023, when it questioned his neutrality due to his long professional association with the adhesives maker.

“He is the Executive Chairman and Creative Director of Ogilvy & Mather South Asia. The Company regularly obtains services from Ogilvy and Mather Pvt. Ltd., in which Shri Pandey, Independent Director of the Company, is a Whole-Time Director. This could lead to conflict of interest," LIC reasoned in its voting disclosure.

“Unqualified financial statements"

In yet another case, LIC approved a resolution it had abstained from voting on in previous years. When Adani Enterprises sought shareholder nod to adopt its audited standalone and consolidated financial statements for FY25, LIC voted aye, breaching one of its most consistent voting patterns: not approving financial statements with a qualified auditor opinion.

A qualified audit opinion indicates that the auditor believes a company's financial statements has specific issues even if they are presented fairly.

Several foreign investors, including Legal & General Investment Management (LGIM), the UK’s largest fund manager, which manages $1.5 trillion in assets, continued to reject the resolutions citing objections raised by Adani Enterprises' auditors. (The qualified opinion was for the consolidated financials of the company and pertains to ongoing investigations and legal proceedings at Mumbai International Airport Ltd that began under the company's previous owners.)

"A vote against is applied as the auditors have expressed concerns regarding the company's accounts," said LGIM when it rejected the adoption of financials at Adani Enterprises.

Curiously, LIC had abstained from voting on Adani Enterprises’ qualified financial statements in fiscal years 2023 and 2024. But for FY25, the insurer approved of the financial statements, calling them “unqualified financial statements" and “compliant with Indian Accounting Standards" in its voting disclosures.

This unexplained volte face in accepting qualified accounts seems to be in violation of both language and spirit of financial discipline guidelines in LIC's voting policy document that lays out expectations of sound financial management and discipline at its investee companies. "Resolution regarding adoption of accounts which has been qualified by the auditors and has doubtful related party transactions shall not be supported," a guideline in the document read.

Fiduciary question

LIC hasn't kept pace with the best of global governance or proxy voting practices, a governance expert quoted earlier stressed. “People look at LIC when it comes to governance practices. If you are going to vote one way, then you must be willing to keep the same stance across the board, whether it is an Ambani-led company or a small enterprise," said Gopinath.

It is unclear if LIC voting against any Reliance Industries or Adani Group resolutions would have changed the outcome. However, LIC’s position as the largest public investor means its voting practices set benchmarks for other institutional investors and frame expectations for corporate governance in India, an expert said. Large institutional investors like LIC need to "adhere to the voting policy while voting on resolutions," said InGovern's Subramanian.

Gopinath reiterated the question of LIC's fiduciary responsibility towards its policy holders. "When a company puts up a resolution to vote, they are asking shareholders if they are okay with it. If money managers like LIC cast inconsistent votes, they risk failing in their fiduciary duty to uphold the interests of their policyholders, potentially undermining trust and accountability," she said.

In its response Friday evening after this story was first published, LIC reiterated that it is always prudent, consistent, and open minded in its voting decisions “keeping in forefront the fiduciary responsibility to protect and enhance the interests of all our stakeholders".

To be sure, the decisions taken in different instances were by various individuals, even if senior, at LIC may be reflective of individual judgements.

Shares of LIC closed 0.3% higher at ₹895.7 on the National Stock Exchange on Wednesday with a market capitalization of ₹5.66 trillion — the tenth most-valued listed company in India.

(This story was updated to add comments from LIC that came after the story was published.)