Board Open to Continuing Dialogue with Promoters
Appoints legal firm to act as communication vehicle among its members, co-founders and stakeholders
Kala Vijayraghavan & Lijee Philip
Mumbai: The board of Infosys Technologies, facing criticism on corporate governance, is open to continuing constructive dialogue with former chairman NR Narayana Murthy and his founding peers, establishing mechanisms to enhance communication among key stakeholder groups.
The board has appointed legal firm Cyril Amarchand Mangaldas to act as the official communication vehicle among its members, the company’s founders and key stakeholders. The Cyril Shroff-owned legal firm will guide the board on matters such as the appropriate form of engagement and sharing of information while adhering to regulatory norms. Many board members told ET that the way forward is to take stock of the lessons from this episode and put in place systems and structures that prevent such issues from occurring at the software bellwether, which has set wealth-creation benchmarks over the past two decades.
“We are more than happy to receive and have always welcomed suggestions and recommendations from the founders,” Kiran Mazumdar Shaw, independent director on the board, told ET. “Shareholder approval has been taken on all key issues... the severance terms given to (ex-CFO) Rajiv Bansal continues to be a concern to the founders.
“In hindsight, I agree that the compensation package offered to Bansal could have been moderated. However, there was no impropriety and can be best described as a poor judgement call,” she said.
Shaw attributed the episode to the transition process of the board from the founders to an independent team of professionals who are committed to upholding good corporate governance.
Top officials close to the development said that while the board is willing to receive inputs from the promoters and other key stakeholders, there have been some concerns about not respecting its independence. “Everyone on the board are respected professionals and independent — one cannot be puppets in their respective roles. Ultimately, the best interests of Infosys will prevail.” an official told ET. Roopa Kudva, an independent member, said the board has the highest regard for the promoters. It is wrong to assume that there is no dialogue, she said. “We take their suggestions seriously as large shareholders who have built the company. Having said that, the board does what is right for the company, independently evaluates shareholder suggestions and decides whether to accept them,” she said. “For the severance package for Bansal, due process was followed and there was no impropriety... the proposal was put forth by the management, approved by the board, and required disclosures were made,” she said.
“With hindsight, there have been learnings from that episode — and we have taken action. Since then, we have done a thorough market benchmarking exercise on severance pay norms across the countries Infosys works in, as reflected in the senior management contracts in each country,” she said. Board members said that while they view the opinions of the 12% shareholders — promoters — respectfully, they have, and will, go by what the other 88% shareholders support and approve.
Anil Singhvi, founder, Institutional Investor Advisory Services (IIAS), a proxy shareholder advisory firm, said he finds it ridiculous when promoters who hire professionals bring up issues about values and culture three years after the CEO becomes his own person.
“I think it is ingrained in the Indian society — the difficulty to accept an outsider,” Singhvi said. “While some may disagree with the compensation given to Bansal as an exit package, I would like to raise the issue when Narayana Murthy and the founders of Infosys themselves participated in an ADR, which made them eligible for long-term capital gains tax after selling their shares at a huge premium.” Singhvi said: “How much income tax did they pay in India? Eventually, it is all a matter of convenience where promoters are concerned.” PHOTO: ET ARCHIVES