“Corporate governance is about maintaining an appropriate balance of accountability between three key players : the corporation's owners, the directors whom the owners elect, and the managers whom the directors select. Accountability requires not only good transparency, but also an effective means to take action for poor performance or bad decisions.”
Mary L. Schapiro, Chairperson, Securities and Exchange Commission, USA, Address to Transatlantic Corporate Governance Dialogue – September 17, 2009.
Corporate governance is about commitment to values and ethical business conduct. It is about how an organization is managed. This includes its corporate and other structures, its culture, policies and the manner in which it deals with various stakeholders. Accordingly, timely and accurate disclosure of information regarding the financial situation, performance, ownership and governance of the company is an important part of corporate governance. This improves public understanding of the structure, activities and policies of the organization. Consequently, the organization is able to attract investors, and enhance the trust and confidence of the stakeholders.
Corporate governance guidelines and best practices have evolved over a period of time. The Cadbury Report on the financial aspects of corporate governance, published in the United Kingdom in 1992, was a landmark. The Sarbanes-Oxley Act, which was signed by the U.S. President, George W. Bush as a law in July 2002, has brought about sweeping changes in financial reporting. This is perceived to be the most significant change to federal securities law since the 1930s. Besides laying down the standards for directors and auditors, the Act has also laid down new accountability standards for security analysts and legal counsels.
In India, the Confederation of Indian Industry (CII) took the lead in framing a desirable code of corporate governance in April 1998. This was followed by the recommendations of the Kumar Mangalam Birla Committee on Corporate Governance. This committee was appointed by the Securities and Exchange Board of India (SEBI).
The recommendations were accepted by SEBI in December 1999, and are now incorporated in Clause 49 of the Listing Agreement. Our compliance with these various requirements is presented in this section. We fully comply with, and indeed go beyond, all these recommendations on corporate governance.
SEBI also instituted a committee under the chairmanship of
N. R. Narayana Murthy which recommended enhancements in corporate governance. SEBI has incorporated the recommendations made by the Narayana Murthy Committee on Corporate Governance in clause 49 of the Listing Agreement. The revised clause 49 was made effective from January 1, 2006.
During the year, the Ministry of Corporate Affairs, Government of India, published the Corporate Governance Voluntary Guidelines 2009. These guidelines have been published keeping in view the objective of encouraging the use of better practices through voluntary adoption, which not only serve as a benchmark for the corporate sector but also help them in achieving the highest standard of corporate governance. These guidelines provide corporate India a framework to govern themselves voluntarily as per the highest standards of ethical and responsible conduct of business. The Ministry hopes that adoption of these guidelines will also translate into a much higher level of stakeholders' confidence that is crucial to ensuring long-term sustainability and value generation by business.
We believe that sound corporate governance is critical to enhancing and retaining investor trust. Accordingly, we always seek to ensure that we attain our performance goals with integrity. Our Board exercises its fiduciary responsibilities in the widest sense of the term.
Our disclosures always seek to attain the best practices in international corporate governance. We also endeavor to enhance long-term shareholder value and respect minority rights in all our business decisions.
Our corporate governance philosophy is based on the following principles :
The Board of Directors (‘the Board’) is at the core of our corporate governance practice and oversees how the Management serves and protects the long-term interests of all our stakeholders. We believe that an active, well-informed and independent Board is necessary to ensure highest standards of corporate governance.
The majority of our Board, eight out of 14, are independent members. Further, we have audit, compensation, investor grievance, nominations and risk management committees, which comprise only independent directors.
As part of our commitment to follow global best practices, we comply with the Euroshareholders Corporate Governance Guidelines, 2000, and the recommendations of the Conference Board Commission on Public Trusts and Private Enterprises in the U.S. We also adhere to the United Nations Global Compact policy. Further, a note on our compliance with the corporate governance guidelines of six countries (Australia, Canada, France, Germany, Japan and U.K.) in their national languages is available on our website, www.infosys.com.
CRISIL has been consistently assigning us the ‘CRISIL GVC Level 1’ rating over several years now. This Governance and Value Creation (GVC) rating indicates our capability to create wealth for all our stakeholders while adopting sound corporate governance practices.
ICRA assigned ‘CGR 1’ rating to our corporate governance practices. The rating is the highest on ICRA's Corporate Governance Rating (CGR) scale of CGR 1 to CGR 6. We are the first company in India to be assigned the highest CGR by ICRA. The rating reflects our transparent shareholding pattern, sound Board practices, interactive
decision-making process, high level of transparency, disclosures encompassing all important aspects of our operations and our track record in investor servicing. A notable feature of our corporate governance practices is the emphasis on substance over form, besides our transparent approach to follow such practices.
Over the years, the Board has developed corporate governance guidelines to help fulfill our corporate responsibility with our stakeholders. These guidelines ensure that the Board will have the necessary authority and processes in place to review and evaluate our operations when required. Further, these guidelines allow the Board to make decisions that are independent of the Management. The Board may change these guidelines from time-to-time to effectively achieve our stated objectives.
Our policy toward the composition of the Board is to have an appropriate mix of executive and independent directors to maintain the independence of the Board, and to separate its functions of governance and management. Currently, the Board consists of 14 members, five of whom are executive or whole-time directors, one is non-executive and eight are independent directors.
Three of the executive directors are our founders. The Board believes that the current size is appropriate, based on our present circumstances. The Board periodically evaluates the need for change in composition of its size.
Name of the director
around the world (2)
|Founder and non-executive director|
|N. R. Narayana Murthy||63||–||7||–||–|
|Founders and whole-time directors|
|S. D. Shibulal||55||–||7||1||–|
|T. V. Mohandas Pai||51||–||5||–||–|
|Deepak M. Satwalekar||61||5||10||2||2|
|Prof. Marti G. Subrahmanyam||63||1||9||1||–|
|Dr. Omkar Goswami||53||7||12||7||2|
|Sridar A. Iyengar||62||3||10||2||3|
|David L. Boyles||61||–||2||–||–|
|Prof. Jeffrey S. Lehman||53||–||1||–||–|
|K. V. Kamath||62||2||4||–||–|
|Notes :||There are no inter-se relationships between our Board members.|
|(1)||Excluding directorship in Infosys Technologies Limited and its subsidiaries.|
|(2)||Directorships in companies around the world (listed, unlisted and private limited companies) including Infosys Technologies Limited and its subsidiaries.|
|(3)||As required by Clause 49 of the Listing Agreement, the disclosure includes memberships / chairpersonship of audit committee and investor grievance committee in Indian public companies (listed and unlisted).|
|(4)||Ceased to be a director with effect from April 13, 2010.|
Our policy is to have a Non-Executive Chairman and Chief Mentor – N. R. Narayana Murthy; a Chief Executive Officer (CEO) and Managing Director – S. Gopalakrishnan; and a Chief Operating Officer (COO) and Director – S. D. Shibulal. The responsibility and authority of these officials are as follows :
The CEO, COO, the other executive directors and the senior management personnel are responsible for achieving targets. They make periodic presentations to the Board on their responsibilities and performance.
According to Clause 49 of the Listing Agreement with Indian stock exchanges, an independent director means a person who is not an officer or employee of the Company or its subsidiaries or any other individual having a material pecuniary relationship or transactions with the Company which, in the opinion of our Board of Directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. We adopted a much stricter definition of independence as required by the NASDAQ listing rules and the Sarbanes-Oxley Act, U.S.
Prof. Marti G. Subrahmanyam is a Lead Independent Director. He represents and acts as spokesperson for the independent directors as a group, and is responsible for the following activities :