Corporate governance standards at Infosys
had begun slipping prior to the appointment of CEO Vishal Sikka, said a report by proxy advisory firm Institutional Investors Advisory Services.
IiAS has highlighted a few instances where Infosys’s corporate governance practices fell short of what was expected from it.
Among the tenets of Infosys’ corporate governance policy are that it will satisfy the spirit of the law and not just the letter of the law, and that it will go beyond the law in upholding corporate governance standards.
“Yet, the company’s earlier auditors, BSR & Co LLP were its auditors for over 15 years. It is only in January 2017 that Infosys has rotated its auditors and appointed Deloitte Haskins & Sells LLP," said the IiAS report.
"Regulations require auditor rotation once every 10 years, but provided companies a three-year window period to make the switch. If Infosys indeed wanted to follow the spirit of the law – and mandatory auditor rotation being on the anvil was known as early as 2012, when the Companies’ Bill came out – it should have considered rotating auditors much sooner,” said the report.
The other instance was the reappointment of Professor Jeffrey Lehman as an Independent Director for a period of two years.
“Professor Lehman had completed his tenure of 10 years, and while regulations allowed him to stay on, the spirit of the regulation demands rotation. In response to IiAS’ recommendation to vote AGAINST Professor Lehman’s reappointment, Infosys cited that it was legally complaint.
While that was indeed so, Infosys was in violation of its own Corporate Governance Philosophy. That investors too did not like this stance is evidenced in the voting pattern – 15 percent of the shareholders voted against the resolution, which is unusually high for Infosys,” said the IiAS report.
The third instance was the reappointment of co-founder Narayana Murthy to the Infosys board.
“In a June 1, 2013 release, Infosys announced the board had appointed Narayan Murthy as an Additional Director and that it would organize an EGM to appoint him as an Executive Director.
On June 6, 2013, Infosys’ released another statement saying that on May 31, 2013, it had received a notice from a shareholder proposing Narayan Murthy’s candidature for the election to the office of a Director at the ensuing AGM, which was to be held on June 15, 2013.
The shareholder’s notice seemed to be conveniently timed just so that Narayan Murthy’s reappointment could be placed before shareholders at the AGM: with appointment proposal dated May 31, 2013, shareholders were given a 15-day prior notice to vote him in at the AGM. Coincidence?,” the report said.
The report concluded by saying that while Infosys' continues to maintain high corporate governance standards, it is no longer a cut above the rest of corporate India.