Last Updated : Aug 23, 2017 09:27 PM IST | Source: CNBC-TV18

Infosys paying price for ignoring basics of corporate governance: SEBI ex-chief Damodaran

Speaking to CNBC-TV18, Damodaran said the tensions between the Board and founders that culminated in the resignation of CEO Vishal Sikka did not happen overnight.

The current strife at Infosys was a "story waiting to happen", according to M Damodaran, former Chairman of the Securities and Exchange Board of India (SEBI).

Speaking to CNBC-TV18, Damodaran said the tensions between the Board and the founders— led by former chief executive Narayana Murthy — that culminated in the resignation of CEO Vishal Sikka, did not happen overnight.

"When you take liberties with corporate governance structures, this is the price you will pay," said Damodaran, counting the creation of a co-chairman's position among the questionable decisions taken by the Board.

He said Infosys had created the perfect recipe for disaster by ignoring basics of corporate governance.

Damodaran said the basic functions of the board are superintendence, direction and control, all of which it seems to have got wrong.

"It's important for the board to ask itself whether it has measured up," he said. "The board appeared to be pandering to the requirements of one investor. There was preferential treatment accorded to accommodate views of one person over those of others."

In the wake of the ongoing strife, top fund managers and domestic institutional investors have written to the board pitching for the return of former CEO Nandan Nilekani in a "suitable capacity".

But Damodaran is not convinced.

"If you're bringing someone from the outside - even if it's Nandan Nilekani - the Board needs to be cohesive.

Damodaran said having a former CEO on the board is not the best idea as the new one will find it difficult to assert himself or herself.

There have also been calls from former senior hands at Infosys to reconstitute the Board.

Damodaran said it was for the majority of shareholders to decide if this was needed, not one person.

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First Published on Aug 23, 2017 09:06 pm
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