Infosys braces for stormy AGM today, Murthy's return irks investor advisory firm
The firm believes that with this reappointment, Infosys has compromised the very same principles it so strongly advocated during its rise to the top.
Co-founders and the board of India's second-largest global software major Infosys Ltd are bracing for a stormy 32nd annual general meeting (AGM) - over a "son rise" - today.
Though analysts and market watchers hailed the dramatic return of its iconic co-founder NR Narayana Murthy as executive chairman from June 1 to steer the fortunes of the beleaguered IT bellwether, the appointment of his son Rohan Murthy as his executive assistant did not go well with the $7-billion company's investors and industry observers.
Moreover, Institutional Investor Advisory Services (IiAS), an investor advisory firm, believes that by reappointing Murthy, Infosys has compromised on the very principles it so strongly advocated during its rise to the top, according to a CNN IBN report.
The argument is that Murthy's appointment has led to amendments to at least three key principles of Infosys:
1. the retirement age for executives and non-executives
2. that founder children do not take up executive roles.
3. bringing back the post of executive chairman, which had been done away with at Murthy's retirement.
Amit Tandon, managing director, Institutional Investor Advisory Services, told the Business Standard that Murthy's return is a move that turns the clock back for the company. "Having trumpeted their corporate governance practices, one expected higher standards from this company," he said.
The sudden manner in which Murthy was reinstated through a board meeting called on the basis of a shareholder notice too has raised eyebrows. Even market regulator Sebi has sought details from Infosys about a board meeting held on the day founder N R Narayana Murthy was re-appointed to an executive role in the company.
"Why didn't Infosys inform stock exchanges that they have received a notice from a shareholder and they are likely to take it to the board on June 1, because then they had the knowledge? They can't say this board meeting was convened all of a sudden on June 1. I don't think these two things are going together, it can't be sudden," Anil Singhvi, founder director of IiAS told CNN IBN.
The other issue IiAS has raised has to do with the re-appointment of two independent directors - Omkar Goswami and DM Satwalekar.
IiAS argues that Goswami has been on the Infosys board for 13 years and Satwalekar for 16 years - more than the maximum nine years allowed by the company. So if the two can no longer be counted as independent directors, only 44 percent of the Infosys board is independent whereas it should be 56 percent.
IiAS is also opposed to the re-appointment of BSR & Co as auditors of the company as they have been auditors for 15 years and no auditor rotation has happened in seven years.
IiAS, however, supports proposals to re-appoint SD Shibulal, R Seshasayee and Srinath Batni as directors and the appointment of Leo Puri to replace Sridhar Iyengar.
Murthy's return to the helm also abruptly cuts short the five-year tenure of outgoing non-executive chairman K.V. Kamath, who will be a lead independent director on the board.