Home >companies >news >Infosys could have done more on disclosures: Proxy advisory firms

New Delhi: N.R. Narayana Murthy and family did not have the requisite 10% shareholding to approach the National Company Law Tribunal (NCLT) over allegations of falling governance standards and mismanagement at Infosys Ltd. So, Murthy used his reputation to maximize the outcome, say proxy advisory firms.

In addition, they are of the opinion that the board could have ensured higher disclosures to avoid the debacle of its chief executive stepping down abruptly.

“Mr Murthy has a good reputation and it is being used to maximise the outcome. He is exercising disproportionate influence compared to his holding because of the sheer weight of his reputation. One should not mess with a company from outside. If there are issues, then one should find an appropriate forum to address the concerns," said J.N. Gupta, managing director and co-founder of Stakeholder Empowerment Services (SES), a proxy advisory firm.

Three years after Vishal Sikka took over as the first non-founder chief executive of Infosys, the former technology chief at SAP abruptly resigned on Friday. India’s second largest software exporter has named company veteran U.B. Pravin Rao as interim CEO.

According to proxy advisory firms, the ideal candidate to head the IT firm would need to decide whether or not to pay heed to founders.

Amit Tandon, managing director of Institute of Institutional Advisory Services (IIAS), said: “Nandan Nilekani is possibly the very best candidate Infosys can find globally (for the post of CEO). He has kept pace with technology advances, has been instrumental in digitizing the country, and is well-networked with the bureaucracy and global leaders."

Shriram Subramanian, founder and managing director, InGovern Research Services Pvt. Ltd, said that in an ideal scenario, there would be alignment between the board's view, founders and management. “In this case there is a definite misalignment. The board should have reached out to shareholders and founders to work amicably," he added.

“On the one hand, there are still unanswered questions such as Rajiv Bansal’s severance package, overpaying for an acquisition which cast lingering doubts and on the other hand the founders’ need to let go—it is not easy job. The board should have ensured that there is minimum interference by founders and disclosures should have been greater. It is always negative for shareholders if the board is working at cross-purposes with founders," Subramanian added.

Tandon said he hasn’t observed any change in Infosys’s DNA under Sikka. “We have not seen any concrete evidence of any wrongdoing at the company... The company got a third-party audit done of the allegations and made a summary of it available to shareholders. One can always ask for more disclosures but that is in case we suspect something, which no one has done so far."

Gupta of SES said that the company could have made the investigation report public. “Right to privacy does not apply to a publicly owned company. Failure of the board is also apparent in that it has not been able to counter Mr Murthy’s words," he said.

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