The big investors, FIIs etc. engages the Proxy Advisory Firms to get the important information and recommendations which lead the protection of their interest and safeguard of their fund. Prepare a brief note on reasons

Proxy advisory firms are independent research outfits that evaluate the pros and cons of corporate matters such as mergers, acquisitions, top appointments and CEO pay, which shareholders are expected to vote on in AGMs, EGMs or court-convened meetings. Institutional investors contract with these firms to carry out comprehensive reviews of voting proposals that the investors themselves have neither the time nor the resources to undertake. Following are few reasons why institutional investors engage proxy advisors: Proxy advisors generally offer variety of services consisting of both, analyzing the proposals at general meetings and recommending voting decisions. The recommendations of proxy advisors help the investors to obtain a more considered understanding of different agenda items and to arrive at an informed voting decision, allowing them to optimise their own limited resources and cast their votes in a timely and informed manner. Considering that institutional investors invest in multiple companies in different industry range and across the globe, it may not be feasible for those investors to have informed knowledge of the corporate governance specifications of that country and hence there may be an inability to understand the need and impact of a particular agenda item. Proxy advisors help to combat this issue as well through their informed consultancy. Due to cross border voting investors may face issues in terms of language of a country. The proxy advisors can assist in mitigating the language issues as well. Further, they may also enable the investors to have a voting platform in cases where electronic voting is a pre-requisite at general meetings. Apart from the above, general meetings across the globe may be concentrated during a certain period of the year and therefore the investors may not be in a position to gather information and knowledge about all the companies and hence, may not be in a position to take informed decision while voting. Proxy services industry emerged and expanded with the growth of institutional investors and shareholder activism. Proxy services firms play an important role in the proxy voting system. Such firms offer valuable services which includes analysing of the proposals for general meetings and providing voting recommendations, either based on the their own voting policy or on the investor's customised voting policy. Proxy advisers also influence boards' decision making. They do a good job of policing the boards and governance records of the firms they track, and nudging institutional investors to take a stand on governance issues.