Infosys is in the news with the publishing of certain letters containing allegations by whistleblowers about accounting irregularities/ unethical practices. One of the allegations also made is that the CEO of Infosys, Salil Parekh, called two board members madrasis and one lady board member as 'Diva' and said that their views should be ignored. While much has been said about the accounting and other irregularities, some consideration could be given to these alleged remarks.
That such remarks are stereotyping slurs/sexist words and are derogatory is fairly obvious and should not need more words than are already said. The question is whether SEBI should act in such cases against such persons? Or should it leave this to generic laws and/or internal corporate policies?
To be sure, there already are generic laws against certain types of casteism, sexism, etc. As of now, SEBI does not have any specific provisions prohibiting such acts in companies. SEBI has made very basic provisions to encourage gender diversity by requiring at least one woman director on boards of listed companies. There are codes for independent directors too in SEBI/Company laws. However, there are no specific provisions to deal with a situation where racism is practiced against a board member or senior management.
In India, we have diversity on numerous grounds, perhaps far more than in any other country. We have diversity on account of gender, region, religion, caste, the color of skin, race, language, etc. (loosely called as ‘race’ here for simplicity). Stereotyping and insulting on basis of one or more of such factors and using insulting/derogatory terms for other ‘races’ is commonly seen. Discrimination and suppression often follow. That it needs to be condemned is obvious.
SEBI and Company law both leave this matter to companies to deal with as an internal matter. Companies are required to formulate a Code of Conduct. However, except for some matters relating to independent directors, the details are left for each company to work out as they please.
Curiously, Infosys’ own code of conduct has specific provisions against racism, sexism, etc. and provides for disciplinary action as punishment to those who err. The Code is applicable to all employees and even the CEO/Board members.
I think SEBI should make anti-racism provision at least for Board members and senior management. SEBI is closely concerned with ensuring corporate governance in listed companies. Corporate governance arose in the West particularly to reduce the concentration of power in one or more core individuals.
The powers of the CEO needed to be balanced by members of the Board who can question and control and even guide him. This is also the reason why the position of Chairman and CEO is separated since, if one person occupies both positions, he could have excessive powers to run the company as his personal fiefdom harming the interests of shareholders and other stakeholders.
SEBI mandates that at least 50 percent of the Board should consist of independent directors. Committees like the Audit Committee need to have two-third of members as independent directors. A specific committee—the Nomination and Remuneration Committee—is required to be set up consisting of a majority of independent directors to ensure a fair selection of independent directors and senior management.
The independent directors may not have adequate powers individually but they do have a voice. If their voices are suppressed by such racist remarks and discriminatory attitude, the objectives of good corporate governance would be defeated. They may even lose respect and may also hesitate the next time to speak up.
It is thus vital that such an attitude should be barred by due provisions in Securities Laws. This should not be just left to the Company, as is presently the case. The Company may not make such provisions. Even if they do, they may not deal with it in a way that does justice and this can be more so if the persons who indulge in racism are in powerful positions.
Thus, it is suggested that some basic provisions may be made by SEBI ensuring that the power and respect of independent and other directors are not scuttled by racism or otherwise. The Infosys case, irrespective of what its actual and final findings are, should be a good eye-opener for SEBI.
(The author is a chartered accountant)
Updated Date: Oct 24, 2019 09:51:21 IST