About Infosys
Infosys Limited was started by a team of seven software engineers. It began its journey in 1981 with an initial investment of US $250 as a software development organization. It opened the first international office in the USA in 1987. The major revenue of the company came from a dedicated offshore development centre. Infosys came out with an initial public offering in 1993 and became the first Indian IT company to get listed on the NASDAQ in 1999.
Corporate Governance and Infosys
The primary purpose of corporate leadership is to create wealth legally and ethically. This translates to bringing a high level of satisfaction to five constituencies – customers, employees, investors, vendors and the society-at-large. The raison d’être of every corporate body is to ensure predictability, sustainability and profitability of revenues year after year.
– N. R. Narayana Murthy
Infosys was one of the first companies in India to publish a compliance report on corporate governance, based on the recommendations of a committee constituted by the Confederation of Indian Industries (CII). Infosys maintained a high degree of transparency while disclosing information to stakeholders.
The corporate governance philosophy at Infosys is based on the following principles:
- Satisfying the spirit of the law and not just the letter of the law
- Going beyond the law in upholding corporate governance standards
- Maintaining transparency and a high degree of disclosure levels
- Communicating externally in a truthful manner about how the company is run internally
- Complying with the laws in all the countries in which the company operates
- Having a simple and transparent corporate structure driven solely by business needs
- Embracing a trusteeship model in which the management is the trustee of the shareholders’ capital and not the owner
- Driving the business on the basis of the belief, ‘when in doubt, disclose’
History of Corporate Governance in Infosys
In the late 1990s, the Confederation of Indian Industries (CII) published a code of corporate governance. In 1999, the Securities and Exchange Board of India (SEBI) appointed a committee under the Chairmanship of Kumar Mangalam Birla to recommend a code of corporate governance. The report was submitted by the committee in November 1999 and accepted by SEBI in December 1999.
Infosys had accepted the recommendation of both the CII and the Kumar Mangalam Birla Committee and as on date Infosys is also in compliance with the recommendations of the Narayana Murthy Committee on Corporate Governance, constituted by the Securities and Exchange Board of India (SEBI).
Infosys has also been audited for corporate governance by the Investment Information and Credit Rating Agency (ICRA) and has been awarded a rating of Corporate Governance Rating 1 (CGR 1) in 2013 and, later on, Infosys has the highest rating in Environmental, Social, and Governance (ESG) rated by CRISIL’s ESGauge in 2021. Infosys’ FICO (credit score) is A- (as rated by Standard and Poor’s).
Analysis of Corporate Governance in Infosys
Our corporate governance is a statement of the values we stand by as we conduct our business and engage with our stakeholders. Our Company has been a leader in adopting internationally recognized corporate governance guidelines and has set the highest standards in abiding by them.
-Kiran Mazumdar-Shaw
Lead Independent Director, Infosys
Board composition
At the core of Infosys corporate governance practice is the Infosys Board, which oversees how the management serves and protects the long-term interests of all our stakeholders. The majority of the board, seven out of 10, are independent members. As active and well-informed members of the board, they are fully committed to ensuring the highest standards of corporate governance. In addition, the independent directors make up the audit, compensation, investor grievance, nominations, and risk management committees, bringing their valuable perspective to the board.
As a part of our commitment to follow global best practices, Infosys comply with the Euro shareholders Corporate Governance Guidelines 2000, and the recommendations of the Conference Board Commission on Public Trusts and Private Enterprises in the US. Infosys also adhere to the UN Global Compact Program.
Board Independence and Lead Independent Director
The Board of Infosys is composed of a majority of directors who meet the criteria for independence established by the Indian Companies Act, Listing Regulations and the listing standards of the New York Stock Exchange (NYSE).
The Infosys Board also has a Lead Independent Director who serves as a liaison between the non-executive directors of Infosys and management and performs such additional duties as the Board may determine.
Being ethical and managing the business with accountability
Corporate governance is about maximizing shareholder value legally, ethically and on a sustainable basis. At Infosys, the goal of corporate governance is to ensure fairness for every stakeholder – Infosys customers, investors, vendor-partners, the community, and the governments of the countries in which it operate. Infosys Board believes that sound corporate governance is critical in enhancing and retaining investor trust and it is a reflection of Infosys culture, policies, relationship with stakeholders and its commitment to values. Infosys also endeavor to enhance long-term shareholder value and respect minority rights in all our business decisions.
Corporate Social Responsibility
Infosys has been an early adopter of corporate social responsibility (“CSR”) initiatives. Along with sustained economic performance, environmental and social stewardship is also a key factor for holistic business growth. The Company established the Infosys Foundation in 1996 as a not-for-profit nodal body aimed at providing a dedicated approach to community development and also to fulfil our CSR commitments.
Infosys Foundation works towards removing malnutrition, improving healthcare infrastructure, supporting primary education, rehabilitating destitute individuals and caring for animals, and preserving Indian art and culture. Infosys Foundation partners with non-government organizations (NGOs) to make a difference among local communities. The Company’s focus has always been to contribute to the sustainable development of society and the environment, and to make our planet more livable for future generations.
Business Ethics
The Business ethics and values in Infosys are embodied in C-LIFE (Client Value, Leadership by example, Integrity and Transparency, Fairness and Excellence) and Infosys is also in Compliance with the G20/ OECD Principles of Corporate Governance.
The Business ethics is the foundation on which Infosys is built and in good stead from the inception. Infosys was recognized as one of the 2022 World’s Most Ethical Companies for the Second Consecutive Year by Ethisphere.
Environmental, Social, and Governance (ESG)
Infosys has balanced success as a business with unwavering focus on exemplary governance and responsiveness to the needs of the ecology and society. As an early proponent of responsible business, Infosys has readily embraced its obligation to integrate ESG factors into what it do, which is only increasing in importance, particularly in the wake of COVID-19.
For instance, in early 2008, Infosys began to take action to combat climate change and have now announced Infosys’ carbon neutrality achievement for 2020. Today, Infosys’s 2030 vision reflects how ESG will continue to be integral to Infosys’ sustainable business performance. Infosys has the highest rating in Environmental, Social, and Governance (ESG) rated by CRISIL’s ESGauge in 2021.
Consideration towards Stakeholders & Transparency
The Board of Infosys always considers the impact of various actions and decisions on the company’s customers, employees, suppliers, government/administration, statutory authorities and discloses all direct or indirect material matters affecting the stakeholders. This in turn brings transparency for various Stakeholders of Infosys.
Board Committees and its independence
The Board of Infosys has Audit Committee, Nomination and Remuneration Committee, Stakeholders’ Relationship Committee, Risk Management Committee, Corporate Social Responsibility Committee and Environment, Social, Governance (ESG) Committee
The Composition of the committees is as the respective terms of reference drawn in compliance with the Indian Companies Act, Listing Regulations, listing conditions of NYSE and such other laws / regulations for the time being in force.
Risk Management
The Infosys Board is responsible for overseeing management’s efforts to assess and manage material risks and for reviewing options for risk mitigation. The Board also reserves oversight of the major risks of the Company and may delegate risk oversight responsibility to committees of the Board. Risk Management Committee of Infosys assists the Board in fulfilling its corporate governance oversight responsibilities with regard to the identification, evaluation and mitigation of strategic, operational, external environment risks and also approving the enterprise risk management framework and associated practices of the Company.
Corporate governance issues at Infosys
The following were some of the corporate governance issues that raised questions about the governance of Infosys.
Phaneesh murthy case
Infosys became entangled in a scandal, that dented its reputation as a company that had the best corporate governance structure in the country. The events took place during October 1999 and December 2000 became public knowledge in India only when Phaneesh Murthy, the head of the sales and marketing, and communication and product services division of Infosys (and a director on the board), resigned from his post in June 2002. Phaneesh said that he had resigned in order to focus on fighting a lawsuit filed against him in the US. The lawsuit, filed by his former secretary, Reka Maximovitch alleged that Phaneesh had sexually harassed her and unlawfully terminated her employment. The company’s share price declined by 6.6% soon after Phaneesh left.
Infosys thereafter on November 24, 2004 issued a press release wherein Naryana Murthy said “Infosys has learnt that the sexual harassment lawsuit filed by Ms. Jennifer Griffith, a former employee, against the Company and Mr. Phaneesh Murthy, a former director, has been settled by Mr. Phaneesh Murthy and Ms. Griffith, shortly before the October 29, 2004 trial date set for the lawsuit’s trial. Infosys has now learnt that the settlement agreement was recently signed by the parties to the settlement agreement – Mr. Phaneesh Murthy and Ms. Griffith.
Mr. Narayana Murthy added “I am glad that we stood by our objective of not contributing to the settlement of this sexual harassment case involving Phaneesh Murthy.”
The appointment of Vishal Sikka as CEO of Infosys, including his compensation and severance paid to other Company Executives
Mr. Narayan Murthy’s who is one of the Founder of the Company, questioned the appointment of an independent Vishal Sikka, a former member of the executive board at German software firm SAP, took the top job at Infosys in 2014, becoming its first non-founder CEO and severance payouts given to others, including former finance head Rajiv Bansal.
The Infosys Board has backed Sikka, and has brushed aside concerns over CEO compensation, appointment of independent directors and severance pay relating to former employees, saying those were old issues and that full disclosures had been made.
The payment amount of Bansal’s pay was amounted to 24 month of salary. Even security and Exchange board of India consider that the amount is excessive. Infosy’s audit committee commissioned Cyril Amarchand Mangaldas to investigate certain allegations about the payment. The law firm found that the severance pay was “not with the intention of silencing him from disclosing any impropriety”
Conclusion:
The corporate governance standards established by the Board of Directors of Infosys Limited provide a structure within which directors and management can effectively pursue the company’s objectives for the benefit of its stakeholders, and these guidelines are also framed in conjunction with the company’s Memorandum & Articles of Association, the charters of the committees of the Board, and applicable laws, regulations, and guidelines in force for the time being in India and the USA and other jurisdictions, as applicable.
Infosys’ leading position is captioned as an Asian invasion in the rankings(Forbes India Magazine, 2020) and graded 3rd in the world among the best companies in 2019 based on its solidity, honesty, etiquette, justness to its employees, and the accomplishment of its products and services, which instantiates the company’s culinary masterpiece, the veneration it enkindles amongst its stakeholders, and also illuminates the commitment of universal technological services(Forbes American Business Magazine,2020). While it had a few corporate governance issues, they looked into those issues and resolved them so as to ensure its title as India’s best governance company.
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