Board Open to Con­tin­u­ing Di­a­logue with Pro­mot­ers

Ap­points le­gal firm to act as com­mu­ni­ca­tion ve­hi­cle among its mem­bers, co-founders and stake­hold­ers

The Economic Times - - The Infosys Saga -

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

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