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The Best Corporate Governed Company
Submitted on: 3/1/2009
Submitted to: Prof. Anita Chouhan
METs Institute of Management
“We've always striven hard for respectability, transparency and to create an ethical organisation. There are certain expectations that we haven't fulfilled. But we're also a very young organisation and in areas like track record of management, we may be low because we're yet to show longevity.” - Narayana NR Murthy, Chairman and CEO, Infosys Technologies Limited (Infosys), 2001
Madhur Agarwal (002) Kashyap Damniwala (000) Rima (036) Gupta (000) Mubin Panjwani (071) Sneha Saraf (091) Vedant Thakur (114) Maulik Parikh
SR. NO 1. 2. 3.
PARTICULARS Introduction About Infosys About Narayan Murthy Corporate Governance for Infosys
PG NO. 5–6 7–8 9 – 10
Corporate Governance Philosophy Code of Conduct
11 – 16
5. 6. 7. 8.
The High Priest Of Corporate Governance Codes for Corporate Governance Awards Won Structural Risk Ownership Structure & influence (a.) (b.) Transparency of Ownership Ownership Concentration & Influence
17 18 – 20 21 – 27 28 - 40
Shareholder Right & Stakeholder Relation (a.) (b.) (c.) Shareholder Meeting & Voting Process Ownership Rights Stakeholder Relation
Transparency, Disclosure & Audit (a.) (b.) (c.) Content of Public Disclosure Timing & access Audit Process
) (c.) BOD Structure & independence Role & Effectiveness of BOD BOD & Senior Management Compensation Committees Transaction Risk Related Party 9.) (d. Accounting Risk MTM Corporate Governance – The Infosys Way Infosys – A Benchmark For Corporate Governance Bibliography 43 44 – 49 50 51 41 – 42 ccc4ccc . BOD Structure & Effectiveness (a. Nature of Transaction with Related Party Materiality Disclosure 10. 11. 12. 13.) (b.
According to that perspective. As the sole residual claimants on company assets. and Brazil in 1998. when the activities of the corporate sector influenced entire economies and the global financial system. Three years later. two events significantly contributed to making corporate governance nearly a household term. the corporate world. the Board and the Management play the role of trustees. The relationship of the Board and the Management with stockholders should be characterized by candor. shareholders were presumed to have the most incentive to maximize company value. Asia. had highlighted the macroeconomic consequences of weak corporate governance systems.MMMMMINTRODUCTIONMM MM In the last decade. their relationship with employees should be characterized by fairness. The traditional analysis of corporate governance focused on the allocation of power and duty among the Board of Directors. their relationship with the communities in which they operate should be characterized by good ccc5ccc . the Board of Directors acted as the shareholders' agent and management was responsible for daily operations.S. management. and their relationships with others in the corporate structure. In today's scenario. Effective corporate governance requires a clear understanding of the respective roles of the Board and the senior management. and policy makers everywhere began to recognize the importance of corporate governance. The first was the wave of financial crises in Russia. In the aftermath. economists. and shareholders. the corporate scandals in the U.
at the same time. “The fundamental objective of corporate governance is the enhancement of long-term shareholder value while. ccc6ccc . In 1999. protecting the interests of other stakeholders. corporate governance did not have much significance in India. Infosys was one of the first companies in India which had complied with the recommendations made by the committees. and their relationship with the government should be characterized by a commitment to compliance. These committees came out with several recommendations.” Kumar Mangalam Committee Report on Corporate Governance. Till late 1990s. which were made mandatory for the companies to adhere to by 2001. 1999.citizenship. two committees Confederation of Indian Industries (CII) and the Kumar Mangalam Birla Committee were set up to recommend good governance norms.
ccc7ccc . quality and corporate governance in the country and the world and needs to continue on a pristine pure path as we climb bigger mountains in the journey towards full globalization of services! Hence there is the need for more and more companies to adopt the Infosys way of working.Our industry has set many records for growth.
Infosys takes pride in building strategic long-term client relationships. designs and delivers technologyenabled business solutions that help Global 2000 companies win in a Flat World. it is a global leader in the "next generation" of IT and consulting with revenues of over US$ 4 billion. Infosys defines. Australia. Infosys has over 103. where it makes the best economic sense. which emerged as a disruptive force in the industry leading to the rise of offshore outsourcing. independent testing and validation services. maintenance. China. Infosys also provides a complete range of services by leveraging our domain and business expertise and strategic alliances with leading technology providers. IT infrastructure services and business process outsourcing. The GDM is based on the principle of taking work to the location where the best talent is available. Over 97% of our revenues come from existing customers. Canada and Japan.000 employees. Today. Infosys' service offerings span business and technology consulting. Infosys has a global footprint with over 50 offices and development centers in India. the UK. reengineering. with the least amount of acceptable risk. systems integration. product engineering. Infosys pioneered the Global Delivery Model (GDM).MMMMMABOUT INFOSYSMMVM Infosys Technologies Ltd. application services. Poland. (NASDAQ: INFY) was started in 1981 by seven people with US$ 250. ccc8ccc . custom software development. the Czech Republic.
vendors and society at large. employees. delivered by best-in-class people.Vision "To be a globally respected corporation that provides best-of-breed business solutions. and courtesy towards our clients. sincere and open in all our transactions Fairness: To be objective and transactionoriented. and thereby earn trust and respect • • ccc9ccc . honesty." Mission "To achieve our objectives in an environment of fairness. The values that drive us underscore our commitment to: • • Customer Delight: To surpass expectations consistently customer Leadership by Example: To set standards in our business and transactions and be an exemplar for the industry and ourselves Integrity and Transparency: To be ethical." Values We believe that the softest pillow is a clear conscience. leveraging technology.
our teams.• Pursuit of Excellence: To strive relentlessly. our services and products to become the best ccc10ccc . constantly improve ourselves.
SUPER RICH An Indian IT chief who's really made it big without dropping his ethical precepts by the wayside is Nagawara Ramarao Narayana Murthy. Infosys is the first Indian company to be listed on the US NASDAQ.MMMMNARAYAN MURTHYMMVM SIMPLE. The decade until 1991 was a tough period when the couple lived in a one-room house. While working in France in the 1970s. The Infosys legend began in 1981 when Narayana Murthy dreamt of forming his own company. Murthy went on to acquire a degree in Electrical Engineering from Mysore University and later studied Computer Science at the IIT. A bright student. he says: "I'm a capitalist in mind. Infosys now has 400 employees who are dollar millionaires. Murthy was strongly influenced by socialism. his wife Sudha-then an engineer with Tatas-had saved Rs 10.000. In a poll conducted by Asiaweek. Born in 1946. like many Indian women who save secretly without their husband's knowledge. Kanpur. India. There was a minor hitch was that he didn’t have any seed money." It was this belief in the distribution of wealth that made Infosys one of the first Indian companies to offer employees stock-option plans. soft-spoken man was selected one of the 50 most powerful people in Asia for 2000. along with six friends. SELFLESS. the quiet. Murthy's father was a schoolteacher in Kolar district. This was Murthy's first big break. ccc11ccc . India. Luckily. The bubble was pricked. Karnataka. Chairman of Infosys. when he was arrested in Bulgaria on espionage charges. And 50 per cent of the respondents in an online poll conducted by The Economic Timesvoted him the best CEO of India. a socialist at heart. Today. however. The second break came in 1991 when Indian doors to liberalization were flung open… Murthy grabbed the opportunity with both hands and has never looked back ever since. Today.
in everything that humans do they should ask themselves whether we they are adding value to the society regardless of which part of the globe they are in. The man still doesn't know how to drive a car! On Saturdays-his driver's weekly off-the Infosys chief is driven to the bus stop by his wife. which channels Rs 50 million into charity every year. from where he boards a company bus to work! Incidentally. humility and maintaining a low profile are the hallmarks of this super-rich Bangalorean. And the man is principled to a fault.Heading a company with the largest market capitalization didn't changed Murthy's life-style much. he can never become long-term players. Simplicity. Therefore. ccc12ccc . Murthy's unprecedented wealth has catapulted him into the public glare. The Infosys founder member says that unless a person makes a difference to the society and earn their trust. And finally the philanthropist Murthy with some of the founder members of infosys have contributed more then a billion rupees for the upgradation of the IIT centers. Sudha Murthy is Chief of the Infosys Foundation.
the governments of the countries in which it operates. believing that a company that is “globally respected.customers. with a culture of innovation should lead by practice of these values. employees. Infosys Technologies.” said Kris Gopalakrishnan. corporate governance is a reflection of their culture. transparent. President and Board Member. He explained how the company aims to satisfy the spirit – not just the letter – of the law. vendor-partners. Infosys believe that sound corporate governance is critical to enhance and retain investor trust. Thus. our relationship with stakeholders and our commitment to values.” Corporate governance is about maximizing shareholder value legally. ethically and on a sustainable basis. ccc13ccc . policies. and the community. investors. while ensuring fairness to every stakeholder .HGDSDSD IMPORTANCE OF CORPORATEDDSD SDSDGOVERNANCE FOR INFOSYSDSDD “Sound corporate governance is critical to enhance and retain investor trust.
Mr Gopalakrishnan also described the high level of transparency that characterizes the company’s investor relations. ICRA has rated our corporate governance practices at CGR 1. The Infosys philosophy is that an active. CEO. Their disclosures always seek to attain the best practices in international corporate governance. for example. A majority of board members (eight out of fifteen) are independent. through its rural reach and teacher training programme. Infosys have undergone the corporate governance audit by ICRA and CRISIL. ccc14ccc . Infosys also endeavors to enhance long-term shareholder value and respect minority rights in all business decisions. COO and CFO. and there is clear demarcation of the responsibilities and authority of the chairman. Infosys have complied with the recommendations of the Narayana Murthy Committee on Corporate Governance constituted by the Securities and Exchange Board of India (SEBI). Their efforts are widely recognized by investors in India and abroad.Accordingly. it always seeks to ensure that Infosys attains its performance rules with integrity. CRISIL has assigned CRISIL GVC Level 1 rating. and demonstrated how seriously Infosys takes its social responsibilities. well-informed and independent board is necessary to ensure the highest standards of corporate governance. Infosys continues to be a pioneer in benchmarking corporate governance policies with the best in the world. The Board exercises its fiduciary responsibilities in the widest sense of the term. The audit committee consists solely of independent directors.
" Smt. 2008 njjnjnCORPORATE GOVERNANCE PHILOSOPHYnjjnjn Our corporate governance philosophy is based on the following principles: • Satisfy the spirit of the law and not just the letter of the law • Corporate governance standards should go beyond the law • Be transparent and maintain a high degree of disclosure levels • When in doubt. It includes the ability to function profitably while obeying laws. Pratibha Devisingh Patil. disclose • Make a clear distinction between personal conveniences and corporate resources • Communicate externally. about how the Company is run internally • Comply with the laws in all the countries in which the Company operates • Have a simple and transparent corporate structure driven solely by business needs • Management is the trustee of the shareholders' capital and not the owner ccc15ccc . rules and regulations. in a truthful manner."Corporate governance is about working ethically and finding a balance between economic and social goals. February 12. Hon. President of India.
Our reputation and ability to comply with all applicable laws depends on the integrity and upright behavior of each one of us and your pledge to continue to adhere to this code will help us to be Powered by Intellect and Driven by Values. comply with all applicable policies and procedures. Integrity and Transparency. investors. Fairness and Pursuit of Excellence. The essence of this code is based on the Infosys Core Values of C-LIFE – Customer Delight. Our challenge is to continue maintaining this high standard. To this end. understand. and ensure that all agents and ccc16ccc . communities. All Company employees and trainees are expected to read and understand this Code of Business Conduct and Ethics. our challenge is to continue doing this. uphold these standards in day-to-day activities. we have adopted this code of business conduct and ethics to guide our transactions with our colleagues. Today every action of the company and its employees is the focus of public attention and we need to reinforce our tradition of values. Today. regulators and society. and also ensure that others who work for you do the same. customers. We ask you to read. Leadership by Example. This Code of Business Conduct and Ethics helps ensure compliance with legal requirements and our standards of business conduct. enforce and adhere to this Code. governments.NjjnjnCODE OF CONDUCTnjjnjn Infosys has always followed the highest standards of corporate governance. We have set new levels in transparency and integrity. even as we become a global company and work in multi-cultural environs.
retribution or retaliation against any person who has in good faith reported a violation or a suspected violation of law. Many of these practices reflect legal or regulatory requirements. Workplace free of Harassment A2. Dress Code and other personal standards A5. threats. You should be alert to possible violations and report possible violations to the Human Resources Department or the Legal Department. is prohibited. or against any person who is assisting in any investigation or process with respect to such a violation. Reprisal. its directors. Expense Claims B. this Code of Business Conduct or other Company policies. Conflicts of Interest ccc17ccc . officers.contractors are aware of. Ethical business conduct is critical to our business. the Company. Part of your job and ethical responsibility is to help enforce this Code of Business Conduct and Ethics. Each year as part of your annual review you will be asked to sign an acknowledgment indicating your continued understanding of the Code of Business Conduct and Ethics. You must cooperate in any internal or external investigations of possible violations. General Standards of Conduct A1. Drug and Alcohol Abuse A3. and other employees. your responsibility is to respect and adhere to these practices. As an employee. YOUR RESPONSIBILITIES TO THE COMPANY AND ITS STOCKHOLDERS A. Violations of these laws and regulations can create significant liability for you. understand and adhere to these standards. Applicable Laws C. Safety in Workplace A4.
Publications of Others D. Prohibition Against Short Selling of Company Stock H. Records on Legal Hold. Government Relations G. Lobbying H. K. Obligations Under Securities Laws-"Insider" Trading G. Use of Company's Assets I. Maintaining and Managing Records J. Solicitation and Literature Distribution of E. Handling the Confidential Information of Others E.D. Payment Practices L. Selecting Suppliers F. Government Contracts I. Payments or Gifts from Others C. RESPONSIBILITIES TO OUR CUSTOMERS AND OUR SUPPLIERS A. Protecting the Company's Confidential Information F. Customer Relationships B. Free and Fair Competition DISCIPLINARY ACTIONS ccc18ccc . Corporate Opportunities D1. Foreign Corrupt Practices Act.
It was one of the first companies in India to publish a compliance report on corporate governance. In 2001. Infosys was rated India’s most respected company by Business World. It was voted India’s best managed company five years in a row (19962000) by the Asiamoney poll. Because of its good governance practices. Infosys had also provided all the information required by the Cadbury committee Infosys had benchmarked its corporate governance practices against those of the best managed companies in the world. Infosys maintained a high degree of transparency while disclosing information to stakeholders. based on the recommendations of a committee constituted by the Confederation of Indian Industries (CII). Infosys was the recipient of many awards. In 1999. Infosys was also ranked second in corporate governance among 495 emerging companies in a survey conducted by Credit Lyonnais Securities Asia (CLSA) Emerging Markets. Infosys Technologies Limited (Infosys) had clearly emerged one of the best managed companies in India. Infosys had been selected as one of Asia’s leading companies in the Far Eastern Economic Review’s REVIEW 2000 Survey and voted India’s most admired company by The Economic Times. In 2000. Infosys had been awarded the “National Award for Excellence in Corporate Governance” by the Government of India.ddddd THE HIGH PRIEST OF CORPORATEddd dddddGOVERNANCEddddd By the late 1990s. It had been providing ccc19ccc . Its corporate governance practices seemed to be better than those of many other companies in India.
ccc20ccc . It was one of the few companies in India to provide segmentwise breakup of revenues.consolidated financial statements under US GAAP to its global investors and financial statements under Indian GAAP to Indian shareholders. Infosys provided details on high and low monthly averages of share prices in all the stock exchanges on which the company’s shares were listed.
3 and 4 which deal with the auditor-company relationship.fdfdf CODE OF CORPORATE GOVERNANCEfdfdf In the late 1990s. The Naresh Chandra Committee report contains five chapters. Chapter 1 is an introductory section and Chapter 5 relates to regulatory changes. The trigger was instances of scams in the U. auditing the auditors’ and independent directors’ role. In fact. remuneration and training are relevant to us. 2002.S. prompted the Indian regulators and authorities to come out with almost similar recommendations.S. In 1999. the Confederation of Indian Industries (CII) published a code of corporate governance. The report was submitted by the committee in November 1999 and accepted by SEBI in December 1999. constituted a high-level committee under the chairmanship of Naresh Chandra to examine the auditor-company relationship and to regulate the role of auditors. the spontaneity with which the U. by an order dated August 21. 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. Naresh Chandra Committee The Government of India. ccc21ccc . responded to the high-profile corporate scams by enacting the Sarbanes-Oxley Act in a very short time and taking strong measures to deter recurrences of such scams. Chapters 2. and certain instances in India involving auditors. Infosys comply with these recommendations.
In accordance with the guidelines provided by SEBI. Audit committee. The SEBI Board considered and adopted the recommendations of the committee in its meeting held on January 25. the market regulator. Infosys comply with these recommendations. Narayana Murthy. Board procedure. the stock exchanges had modified the listing requirements by incorporating in the listing agreement a new Clause 49. R. Shareholder Information. to promote and raise the standards of corporate governance.Kumar Mangalam Birla Committee SEBI appointed the Committee on Corporate Governance on May 7. so that proper disclosure for corporate governance is made by companies in the following areas: Board of directors. ccc22ccc . member of the SEBI Board. Management discussion and analysis. constituted the Committee on Corporate Governance under the chairmanship of N. under the chairmanship of Kumar Mangalam Birla. and Corporate governance report in the annual report. 1999. Remuneration committee. in order to enhance the transparency and integrity of the market. with a view to improve corporate governance standards in India. This move of SEBI signifies the regulator’s anxiety to ensure that the governance practices are corrected and improved upon expeditiously. The terms of reference for the committee were to review the performance of corporate governance and to determine the role of companies in responding to rumors and other price-sensitive information circulating in the market. Revised Clause agreement 49 of the listing SEBI. 2000.
Infosys fully comply with the revised Clause 49 of the Listing Agreement. improving the quality of financial disclosures. the position of nominee directors. ccc23ccc . requiring corporate executive boards to assess and disclose business risks in the annual reports of companies. The mandatory recommendations focus on strengthening the responsibilities of audit committees. Clause 49 as revised was made effective from January 1. and improved disclosures relating to compensation to non-executive directors and shareholders’ approval of the same. The non-mandatory recommendations pertain to moving to a regime providing for unqualified corporate financial statements. including those pertaining to related party transactions and proceeds from initial public offerings. training of Board members and evaluation of non-executive directors’ performance by a peer group comprising the entire Board of Directors. calling upon the Board to adopt a formal code of conduct. excluding the director being evaluated. 2006. SEBI has incorporated the recommendations made by the Narayana Murthy Committee on Corporate Governance in Clause 49.The committee came out with two sets of recommendations: the mandatory recommendations and the non-mandatory recommendations.
a globally respected company ccc24ccc . noting that "Infosys' SAP practice is aligned along verticals to ensure that clients get the benefit of its deep vertical process expertise. industry bodies. 14 among the most respected companies in the world by Reputation Institute's Global Pulse 2008 Infosys wins award for best investor relations by an APAC company in the US market at IR Magazine US Awards 2008 Best Investor Relations Website and Company with Best Corporate Governance Practices in Investor Relations (IR) Global Rankings 2008 in APAC categories • • • 2007 • The Reputation Institute: Infosys." 2008 • The Asset magazine acclaims Infosys' Corporate Governance Infosys ranked No. media and other influencers.MMMMAWARDS WONMMMM Infosys has consistently been honored by customers. The following are among the recognitions received over the past year: An independent analyst has cited Infosys as a leader in SAP implementation services.
Kearney Infosys tops the regional rankings for best Corporate Governance in Asiamoney’s Corporate Governance Poll Best Annual report award from the Institute of Chartered Accountants of India for tenth successive year • • • 2004 • SAFA (South Asian Federation of Accountants) Best Presented Accounts Award 2003 in the Communication and Information Technology Sector based on the evaluation of the Annual Report of the company ccc25ccc .2006 • • Infosys is most admired company for the 6th consecutive survey by Asia Wall Street Journal Infosys is the ‘Best company to Work For In India 2006’ says the BT-Mercer-TNS survey published in ‘Business Today’ Infosys is ranked the “Businessworld Most Respected Company” in a survey.T. The special issue featured rankings of top companies from all sectors • 2005 • First position in SAFA (South Asian Federation of Accountants) Best Presented Accounts Award 2004 in the Communication and Information Technology Sector based on the evaluation of the Annual Report of the company Infosys named “India’s Best Managed Company” based on a study conducted by Business Today and A.
1 Employer in the IT sector by Dataquest for the second time in a row Ranked the Best Employer in India by Business Today-Hewitt in their annual survey Awarded the Global Corporate Achievement Award 2002 for Asia Pacific Region by Economist Intelligence Unit [EUI] Ranked as the Best Managed Company In India by Asiamoney Rated the Most Respected Company in India by Businessworld Rated the Most Globally Competitive Company. Most Dynamic Company. Most Ethical Company and Best IT Company by Businessworld A Financial Times-PwC survey listed Infosys among 50 companies that demonstrate the most integrity • • • • • • 2002 ccc26ccc .• Infosys is ranked as one of the World’s Most Respected Companies in the Financial TimesPwC annual survey Infosys Sweeps Businessworld Most Respected Companies Awards Rated as India’s most respected company by FT-PwC survey Best Annual report award of the Institute of Chartered Accountants of India for ninth successive year • • • 2003 • Ranked as the No.
London Ranked No. Department of Company Affairs. Government of India Golden Peacock Award for Excellence in Corporate Governance in the Global Category by the World Council for Corporate Governance." Corporate Citizenship Award by The Economics Times of India The Institute of Company Secretaries of India National Award for Excellence in Corporate Governance by the Ministry of Law. Infosys was also ranked number one on 13 of the 18 parameters judged by the survey • ccc27ccc . a corporate governance survey of emerging market companies by CLSA Emerging Markets The Institute of Chartered Accountants of India award for best presented annual report in 2001 for the seventh successive year Asiamoney award for best investor relations in India for 2001. best managed company in India for 2001 and best managed company of the decade in India 1991-2001 • • • • 2001 • Infosys has been ranked #2 in corporate governance in a survey of 495 emerging market companies by CLSA Emerging markets Infosys was ranked Number One among the most respected companies in India by the Business World-IMRB Survey.• • • First rank in the Business World's survey of "India's Most Respected Company. Justice and Company Affairs. 1 in CG Watch 2002.
among the entries received from non-financial. 2000 as the best among the entries received from NonFinancial Private Sector Companies for the Best Presented Accounts Competition 1999-2000. Shri P. Bhagwati. Infosys received the Silver Shield from the Institute of Chartered Accountants of India for the Best Presented Accounts. Bombay Stock Exchange • • • 1999 ccc28ccc . for the year 1998-99 Infosys was awarded the "National Award for Excellence in Corporate Governance" by a panel of judges chaired by Former Chief Justice of India. This award is conferred by the Government of India and sponsored by Unit Trust Of India Won the Corporate Award for excellence in Corporate Governance.N. 1998 and 1999) by the Asiamoney poll For the fifth year in succession. 1997. This is the sixth consecutive year that Infosys has won the Silver Shield • \ 2000 • Voted India's Best Managed Company four years in a row (1996.• Infosys has been ranked #2 in corporate governance in a survey of 495 emerging market companies by CLSA Emerging markets The Institute of Chartered Accountants of India has adjudged the "Annual Report and Accounts" of Infosys for the year ended March 31. private sector companies.
• Infosys was voted India's most admired company by The Economic Times Survey of India's Most Admired Companies Won the Best Managed Company (1999) by Asiamoney magazine award • • Received the ICAI Silver Shield for Best Presented Accounts for the fourth consecutive year National Award for Excellence in Corporate Governance . New Delhi Won "Company of the Year" from The Economic Times Awards for Corporate Excellence • 1997 • Voted one of Asia's Companies by Asia Money Best Managed 1995-1996 • Voted as one of Asia's Companies by Asiamoney Best Managed ccc29ccc . India Corporate • • Best Annual Report Award for 1997-98 from the Institute of Chartered Accountants of India.Sponsored by the Unit Trust of India • 1998 • Won the award for the Best Published Corporate Accounts in the non-financial sector for 1996-97 awarded by the South Asian Federation of Accountants Ranked first in the "Award for Excellence". Economic Times.
Institute of Chartered Accountants of India.1994-1995 • Won the Best Annual Report Award. New Delhi ccc30ccc .
ICRA ICRA assigned "CGR 1" rating to our corporate governance practices." besides our transparent approach to following such practices. The rating reflects our transparent shareholding pattern. A notable feature of our corporate governance practices is the emphasis on "substance" over "form. and our track record in investor servicing. and disclosures encompassing all important aspects of our operations. This Governance and Value Creation (GVC) rating indicates our capability to create wealth for all our stakeholders while adopting sound corporate governance practices. The rating is the highest on ICRA's Corporate Governance Rating (CGR) scale of CGR1 to CGR 6. ccc31ccc . sound Board practices. We are the first company in India to be assigned the highest CGR by ICRA.scscasad CORPORATE GOVERNANCE RATINGSsasadcsc CRISIL CRISIL assigned us the "CRISIL GVC Level 1" rating. interactive decision-making process. high level of transparency.
Undue influence of ownership is controlled by an active and zealous audit ccc32ccc . for example) and a culture that restricts deals with executives outside the ordinary course of business. class and categories of shareholders. The largest single shareholder (Mr. and the size of these stakes is slowly decreasing. Substantial shareholders are disclosed down to the level of five percent.cdcdcSTRUCTURAL RISKScdcdc OWNERSHIP INFLUENCE STRUCTURE AND EXTERNAL Transparency of Ownership Infosys is a widely held company with a transparent shareholding structure. In addition to disclosing shareholdings by category. The company discloses shareholdings by type and percentage. The separation is reflected in the absence of most personal benefits that would normally accrue to a founding executive (there is only one company car. though strict separation between management and ownership is maintained. Ownership Concentration and Influence Influence of ownership is most strongly felt among the founder/managers of the company. the company’s annual report also discloses a distribution of shareholdings by size. Infosys shares are widely held and its shareholding structure is transparent. Standard & Poor’s has seen evidence of a strict separation between ownership and control and between the roles of founders as owners and as executives. Shareholdings of directors are adequately disclosed.7% of Infosys’ shares.Narayana Murthy and his family) holds 6.
The extent to which this can be maintained will depend to some degree on the continuity of current management. as there are reasonable questions about what would happen were a bid to be made that did not coincide with the company’s (and founders’) values. there is positive influence from the founders collectively. one of the few potential areas where influence might be negatively felt is in a change of control. Key Infosys has wellestablished procedures for disseminating shareholder meeting information. additional information on nominated directors. as the founders may not receive stock options. the company has seized the earliest opportunity to increase the limit on foreign ownership of its shares to 100 percent. a proxy form ccc33ccc .committee and by both the internal and external auditors. For its part. Indeed.62 percent.3). Moreover. Standard and Poor’s assesses as positive the recent amendment to the company’s Articles that removed protection for Mr. Also. The company’s website is accessible and informative.Murthy’s position as CEO (managing director) providing he held at least five percent of the company’s equity. showing increased openness to a bid (See Section 2. their stake. will decrease over time as other options are exercised Despite this. Registered shareholders are sent copies of the notice of meeting along with detailed explanatory notes when there is special business. The company supplies comprehensive information to shareholders well in advance of company meetings. SHAREHOLDER RIGHTS AND STAKEHOLDER RELATIONS Shareholder Meeting & Voting Procedures Infosys’s commitment to shareholder democracy is strong. which now stands at 26. on everything from the company’s culture of transparency to its long-term strategy.
However. The notice clearly spells out voting procedures at shareholders’ meetings and provides information regarding relevant documents that can be inspected by shareholders. The company webcasts the meeting to enable shareholders across the world to view the proceedings. an acquisition. members present at a meeting with just a few shares could have a greater effect on voting than large shareholders who have sent their proxies for attending the meeting. the appointment of new directors. Ownership Rights & Takeover Defenses Ownership rights are clearly stated and well protected. a representative exercises the rights of a corporate member as if it were an individual) can vote by show of hands. A poll is conducted only if demanded by a member or a proxy holding at least one-tenth of the total shares entitled to vote or by those holding paid-up capital of at least Rs. including where the company proposes a share buyback. they were announced during the meeting to highlight the opinion of those shareholders who could not attend. A proxy may not vote except on a poll. Rights attached to Infosys shares are secure and fully transferable. Though these votes could not be used to calculate voting results. Karvy consultants. Infosys introduced a non-mandatory postal ballot system for every agenda item at its 2003 meeting. in line with Indian law. Though not required by law. Voting at shareholder meetings is by show of hands. Indian law does not permit electronic voting at shareholder meetings.and an attendance slip.000. or a new issue of shares.50. a representative (as opposed to a proxy. Indian law permits voting by postal ballot under limited circumstances. value-enhancing bid for the company’s shares. There are no obstacles to a legitimate. who are reputable independent registrars and share ccc34ccc . As neither shareholders nor management insist that polls are called for every resolution.
Section 107 of the company’s charter stated that Mr. Shareholders may also put forward shareholder proposals and convene extraordinary shareholder meetings according to reasonable and well-articulated procedures. which it has followed. remuneration plans. a company cannot refuse any share transfer on the pretext of a takeover threat or a possibility of change in management. dividends. Voting rights are laid out by the Companies Act of India. The company’s Memorandum and Articles of Association do not have any explicit anti-takeover provisions. The company’s ADR issue is administered by Deutsche Bank. The company has removed from its Articles a provision that. The company has a clearly stated dividend policy of distributing up to 20 percent of profit after tax. article amendments. Infosys has been prompt in paying declared dividends. receive dividend payments. Owners of ordinary shares have the right to vote. Murthy would not be required to stand for reelection as CEO (managing director) provided he or his relatives held five percent of the company’s shares. be refused by the company’s board if good reason is given.transfer agents in India. Any person whose shareholding exceeds five percent ccc35ccc . however. and in the case of liquidation of the company. including if the transferee is not a desirable person in the context of the overall interest of the company. Shareholders vote on all major company decisions including the election and removal of directors. In line with the Indian Companies Act. All ordinary (common) shares are equal. sharebuyback plans and major acquisitions and disposals via either ordinary or special resolutions as laid out by the Companies Act. to receive proportional payment in turn. no preference is given to any particular holding. 1956. could have thwarted an otherwise valueenhancing bid. Share transfers can. are given charge of shares of the company. if invoked. appointment of auditors.
The company contributes to TheInfosys Foundation. which is involved in various charitable works and the Foundation reports on its activities annually. Infosys proposed this change within months of India’s amendment of the Foreign Exchange Management Act (FEMA). the capital market regulator) in writing and must make an open offer to remaining shareholders if shareholding exceeds 20 percent. Stakeholder Relations Relations with stakeholders appear to be moderately strong.should inform the company and the Securities and Exchange Board of India (SEBI. to increase the maximum limit on foreign holdings in the company from 49 to 100 percent. 2002. which permitted software companies to increase this limit and made the change despite some opposition from local shareholders concerned about how it might eventually affect the company’s nationality. including one by a foreign company. or other stakeholders. There do not appear to be any problematic relationships between the company and its employees. its suppliers. Infosys has been proactive in this sense and shareholders approved a management-sponsored resolution at its shareholder meeting in June. a change that would allow a legitimate takeover to succeed. Reporting on stakeholder issues at Infosys is adequate. Hence. ccc36ccc . Infosys can only with great difficulty refuse any take-over attempt by any person either by law or by provisions in its charter.
devoting the amount of time and money to disclosure that Infosys does would likely be unsustainable or of questionable use of shareholders’ funds.TRANSPARENCY. DISCLOSURE & AUDIT Content of Public Disclosure Infosys uses its strong disclosure standards as a differentiator and as a way to gain competitive advantage over its competitors. employees. in its industry. counterparties and importantly. To the suggestion that there ccc37ccc . Infosys has undertaken to disclose its financials and non-financials as if it were a USincorporated. Infosys’ high disclosure standards are already widely recognized. For Western companies however. The company produces a very strong annual report. maintains a comprehensive website and presents its financial statements according to multiple accounting standards. SEC-registered company. The company quite early in its development adopted a policy of enhanced disclosure to give it a competitive advantage in developing trust and attracting investors.
Japan and the United Kingdom. and reports on its compliance with the respective corporate governance standards of these markets again. research. Infosys’ annual report and 20-F filing to the American SEC are very comprehensive: disclosure includes an exhaustive corporate governance review. The company provides details about related party transactions undertaken during the year (for example. ccc38ccc . knowledge management and includes an interactive and comprehensive investor relations section. As long as disclosure continues to be a competitive advantage for Infosys. Germany. As well. It does seem. or a point of diminishing returns. Content is both deep and broad. business strategy and corporate governance practices. France. the annual report also contains summary financial statements prepared in substantial compliance with the GAAP requirements of Australia. however. Canada. The company’s website is presented in five languages (those of its major clients and investors) and provides information about the various measures undertaken in areas of community service. each in their original language. and not just those Infosys has adopted or those adopted in the US. management strongly disagreed. we see no reason to differ. in the original language. financial reports in four languages and reconciliation to eight accounting standards and much else besides.could be too much disclosure. Infosys discloses the aggregate remuneration paid to each full and part time directors. In addition to US and Indian GAAP accounts. to be of most use to an emerging market company with a US-centered client base. which are audited. allowing shareholders to gain a thorough understanding of the company’s and the industry’s financial health. accounts held in financial institutions where Infosys directors also serve). This level of disclosure shows sensitivity to other countries’ standards for corporate governance.
Furthermore. based on their country of origin. and is also on track for substantially early compliance with Section 404 reporting on internal control procedures under the Act. and for which compliance would open the company to liability claims – Infosys’ D&O liability insurance does not cover trades in non-US registered securities).this is disclosure that is tightly tailored to the needs and expectation of Infosys’ investors and clients. Infosys also publishes quarterly reports that are distributed to all its shareholders. this is assessed negatively. shareholder complaints and other SEC filings like the 6-K. The company follows several other rules related to information access that are not required of it. Although Infosys has decided not to charge option expenses against its earnings under US or Indian GAAP – preferring to wait until more consensus is reached on the issue – in terms of Standard & Poor’s corporate governance criteria. Infosys has adopted a number of disclosure standards that are not required of it or it has adopted disclosure standards before they were required. In addition to the Annual Report. it seems unusual for Infosys to stay on ccc39ccc . which deal with reporting of insiders’ and directors’ trades. in the process of obtaining its Level III ADR listing on Nasdaq. quarterly reports include a shareholder-information section. Infosys undertook to comply with all the regulations that would be applicable to a USincorporated company (except for parts of Rule 16(a) of the Securities Exchange Act 1934. For example. While it is true that there is no clear and accepted guidance from regulators on the issue. which gives detailed information about the exchanges Infosys shares are traded on. Infosys’ complied with the certification procedures under the SarbanesOxley Act in advance of its deadline. The quarterly reports include financials in accordance with Indian GAAP (audited) and US GAAP (unaudited).
on 9 January. respectively). 2003. for example.the sidelines of a disclosure issue given the company’s leadership in other areas of disclosure. The company provides audited quarterly results to its shareholders within two weeks from the close of each quarter and announces when it will do so at the beginning of each year (Infosys announced its results for the quarter ended 31 December. Infosys’ standards of providing timely information to shareholders are very strong and in a number of cases exceed local and US requirements. Timing and Access to Public Disclosure Timing and access to disclosure at Infosys is very strong. until last year. Moreover. SEC rules allowed more generous deadlines (From 2004. The company has followed some practices before it was required to and goes to some trouble to promote fair disclosure in the face of restrictive local regulations. the SEC will require filing within 60 and 35 days. the company publishes its 20F (10K equivalent) and 6K (10Q equivalent) filings within 60 days. 2004). even though.The company offers a fax-on-demand ccc40ccc .
Finally. Infosys also hosts two earnings calls with analysts each quarter. Detailed presentations made to media. Infosys has made all its SEC filings in electronic form. institutional investors are displayed on the corporate website. while the US GAAP accounts are audited by KPMG. the company uploads its financial statements onto its website. After the announcement. this has clearly not been the case at Infosys. within an hour of each quarterly announcement. Moreover. Audit Process Infosys’ Indian GAAP accounts are audited by Bharat S Raut and Company (a KPMG affiliate). Infosys meets all its statutory reporting deadlines. which is broadcast live on its website. Its website is easy to find through search engines and it is clear that the company uses it to communicate all important information to shareholders and other stakeholders. the first within four to five hours of announcement of the financial results. it is positive that the company has decided to follow regulation Fair Disclosure (FD). the company makes itself available for television interviews that are of interest to local shareholders. ccc41ccc . the rule does not apply to Infosys. Though Regulation FD remains controversial (some have argued that it has had the effect of encouraging companies to disclose less).service immediately after announcement of quarterly financial results whereby those interested can obtain financial performance details. analysts. as a foreign private issuer. and began doing so before SEC regulations required it of foreign issuers. as if it were required to even though. Media releases are also posted on the website and the entire site is regularly updated. the SEC’s rule governing selective disclosure.
Oversight over the audit process. upon the recommendation of the audit committee and the board of directors as a whole. including that of an independent. and the lead partner on the engagement is a US partner recently relocated to India and fluent in both GAAP standards and the latest in Sarbanes-Oxley related audit independence requirements. of procedures and practices that aim to maintain a high quality audit. the outside auditors. Infosys’ auditors are appointed by shareholders on an annual basis. KPMG. ccc42ccc . Standard & Poor’s saw clear evidence. There is limited.An external firm of chartered accountants carries out the internal audit. in interviews with committee members and in the minutes of the committee. Several of those who have worked with it have commented to Standard & Poor’s that the present committee is among the most active and engaged in India. The audit committee. with one exception. are reputable and well known. except for some minor services provided by KPMG with respect to legal formalities (visa requirements) in countries where Infosys is in the process of setting up offices. Neither internal nor statutory auditors provide consulting or other services to Infosys. boardlevel audit committee. whose role has been clearly identified as one of monitoring audit independence. is composed entirely of independent outside directors. is strong.
Infosys complies with the Euro shareholders Corporate Governance Guidelines 2000. Further. At the core of Infosys corporate governance practice is the Board. As a part of their commitment to follow global best practices. Infosys also adheres to the UN Global Compact Program. nominations and risk management committees. wellinformed and independent Board is necessary to ensure the highest standards of corporate governance. Infosys believes that an active. which comprise of independent directors. which oversees how the management serves and protects the long-term interests of all its stakeholders. investor grievance. consists of independent members. Infosys believe that an active. eight out of 15. which oversees how the management serves and protects the long-term interests of all stakeholders. Infosys has audit. and the recommendations of the Conference Board Commission on Public Trusts and Private Enterprises in the U.specific disclosure about the nature of these services in public reports. The majority of the Board.S. well-informed and independent Board is necessary to ensure the highest standards of corporate governance Let us evaluate the Board Structure & Effectiveness ccc43ccc . compensation. The external auditors finalize their audit plan each year in consultation with the audit committee. Quarterly reports are presented to the management for their comments and responses. BOARD STRUCTURE & EFFECTIVENESS Board Composition At the core of their corporate governance practice is the Board.
Independence of the board It can be gauged from the fact that the Board consists of 15 members. and the number of outside directorships held by each of the directors is given in the table. For its part. According to Clause 49 of the Listing Agreement with Indian stock exchanges. one is non-executive and 8 are independent directors. 6 of whom are executive or full-time directors. would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Infosys adopted a much stricter definition of independence than required by the NASDAQ listing rules and the Sarbanes-Oxley Act. U. ccc44ccc . The composition of Infosys Board.S. in the opinion of our Board of Directors. Infosys. discloses that all eight of its non-executives are independent in all material respects. an independent director means a person other than 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. which has adopted a stricter definition of independence than has heretofore been required of it as a Nasdaq listed company. Board Structure & Independence 1.
financial and or commercial relationships with the company that might lead to conflict of interests. They are generally not expected to serve in any executive or independent position in any Company that is in direct competition with Infosys. Directors represent a diversity of backgrounds and skills. Qualifications and experience are also considered. Expertise in strategy. The process includes evaluation of monetary. They will not be relatives of an executive director or of an independent director. high-tech software Company. Board members are expected to possess the expertise. skills and experience required to manage and guide a high-growth. ccc45ccc .The director selection process includes explicit consideration of independence. deriving revenue primarily from G-7 countries.
finance. and is responsible for the following activities: o Presiding over all executive sessions of the Board’s independent directors o Working closely with the Chairman. ccc46ccc . Co-Chairman and the CEO to finalize the information flow. taking a lead role in the Board evaluation process. Deepak M. The board has decided to appoint a lead independent director to whom other nonexecutives may approach with concerns and avoid insiders from dominating the agenda. CoChairman. Infosys added its first outside directors in 1997 and many of its current non-executives have served on the board for less than three years. meeting agendas and meeting schedules o Liaising between the Chairman. He represents and acts as spokesperson for the independent directors as a group. Role & Effectiveness of the Board Infosys board shows the results of a transition from an insular board dominated by its Indianbased founders and other insiders to an outwardlooking body with a majority of outsiders from a variety of backgrounds and geographies.technology. and o Along with the Chairman and CoChairman. quality and human resources is essential. Earlier when the Chairman was Executive appointing a lead director made more sense. Separation of Chairman & CEO positions The CEO and Chairman positions are separate to avoid conflict of interest and there is an identified lead director. CEO and the independent directors on the Board. 2. Satwalekar is the lead independent director.
though we note that there is no evaluation of the board as a whole. the executive directors and other members of the senior management make presentations on relevant issues.e. there is no evidence of this here. and which appears to be effective and well-received. any of the executive directors or the Management. our independent directors meet periodically in an executive session. Each board member was expected to ensure that other existing and planned future commitments did not interfere with the member`s responsibility as director of Infosys. products and strategies. i. 1. The performance of independent directors is reviewed by the full Board on an annual basis ccc47ccc . In such meetings. There are procedures in place that allow directors to seek outside advice if needed. 2. they should be active participants on the board and not passive advisors. Evaluation of Performance Directors evaluate their own performance on a regular basis. The board has in place a formal training program that allows new directors without industry experience to familiarize themselves with the company’s departments. without the Chairperson. Discussion with independent directors’ The Board’s policy is to regularly have separate meetings with independent directors to update them on all business-related issues and new initiatives. In addition.The board members are expected to rigorously prepare for. attend and participate in all board and committee meetings. For non executive directors to play material role in corporate decision making and to maximize long term shareholder value. While individual evaluations might be divisive on other boards.
Meetings Corporate Governance effectiveness requires participation of the Board members in the meetings conducted during the year. for transacting business. Every Board member is free to suggest items for inclusion in the agenda. along with explanatory notes in consultation with the lead independent director. or when required.3. ccc48ccc . it may not be possible for each one of them to be physically present at all the meetings and so Infosys effectively uses video / teleconferencing facilities to enable their participation. Committees of the Board usually meet the day before the formal Board meeting. India. Most Board meetings are held at Infosys registered office at Electronics City. Independent directors are expected to attend at least four Board meetings in a year. when necessary. The Board meets at least once a quarter to review the quarterly results and other items on the agenda. At Infosys. Additional meetings are held. Dates for Board meetings in the ensuing year are decided in advance and published as part of the Annual Report. and also on the occasion of the annual shareholders’ meeting so that makes it 5 meetings per year. the Board being represented by independent directors from various parts of the world. The Chairman of the Board and the Company Secretary draft the agenda for each meeting. However. and distribute these in advance to the directors. Bangalore.
Board’s policy is to regularly have separate meetings with independent directors to update them on all business-related issues and new initiatives. In such meetings, the executive directors and other members of the senior management make presentations on relevant issues. 4. Retirement Policy Under this policy, the maximum age of retirement for executive directors is 60 years, which is the age of superannuation for our employees. Their continuation as members of the Board upon superannuation / retirement is determined by the nominations committee. The age limit for serving on the Board is 65 years. Impose a retirement age to maintain a mix of skill, energy, enthusiasm and commitment. Ensure that management reports regularly to the board on succession planning
Infosys Succession Planning The nominations committee constantly works with the Board to evolve succession planning for the positions of the Chairman, CEO, COO and CFO and also develops plans for interim succession for any of them, in case of an unexpected occurrence. The Board, if required, may review the succession plan more frequently.
Director & Senior Executive Compensation The approach Infosys has taken to executive pay is rooted in the modest and egalitarian ‘middle class Indian’ values espoused by its founders. While the original seven partners have become wealthy via their equity stakes (In 2004 their collective 26.62 percent stake in the company has a market value of approximately USD 3.2 billion and stake has further reduced to 16.5%), they have insisted on modest annual salaries for themselves in line with Indian, not Western standards, and have never received stock option awards (founders have voluntarily declined option grants since before a 1998 regulation prohibiting company founders from receiving stock options was approved). Moreover, the CEO and Chairman have both made public statements that the highest paid individual at Infosys should not earn more than a small multiple of the salary of the lowest paid professional at the company – at the moment, according to the chairman, somewhere between 10 and 15 times. Indeed, no India-based executive director earns more than USD 42,000, even though several US and European-based executives earn up to USD 243,000. Executives also receive annual, performancelinked bonuses. This approach to pay is reflected
throughout the organization; salaries at all levels are in line or slightly lower than Infosys’ peers within India, yet the company’s collegial working environment and aggressive culture continues to attract large numbers of applicants. This modesty has not, however, dampened the company’s enthusiasm for stock options as a way to provide significant wealth for its employees. Options remain an important motivator and a way to create real wealth among its employees. Compensation policies at Infosys are also underpinned by an independent compensation committee, which plays a key role in setting compensation policy, administers both stock option plans, and which has clearly limited the influence executives have over their own pay. Infosys has even contradicted the cynic’s dictum that a CEO should never put an academic on his compensation committee (and, until recently, Infosys had two). Infosys also distinguishes itself from its US and other competitors by putting all executive director contracts, including salary and bonuses, to shareholders at AGMs, as Indian company law requires. There are no loans outstanding to executive directors. Compensation for non-executive directors is decided by the board’s compensation committee and recommends to the Board. The compensation payable to independent directors is limited to a fixed amount per year as determined and approved by the Board, the sum of which is within the limit of 1% of Infosys net profits for the year. In fiscal 2007-08,it paid remuneration by way of commission to non-executive directors, at a sum not exceeding 0.5% per annum of its net profits.The components are fixed amount and variable amount based on the attendance of the board and committee meetings.
2008. independent directors based overseas and traveling to India to attend Board meetings will be ccc52ccc .The Board further decided that effective April 1.
they appear both necessary and adequate to attract and retain directors that meet the company’s global ambitions.000 per meeting. While these fees are among the highest in India. non-executive directors were also eligible for stock options. Compensation Committee 1. Audit Committee ccc53ccc . Nomination committee.eligible to receive an additional US $5. Structural features like Audit Committee. The decision considers the fact that these independent directors have to spend at least two additional days in travel while attending board meetings in India. The Board believes that the above commission structure is commensurate with global best practices in terms of remunerating non-executive directors of a company of similar size and adequately compensates for the time and contribution made by the non-executive directors. Since 1999.
The committee oversees the work carried out in the financial reporting process by the Management. They are: o Deepak M. timely and proper disclosures. integrity and quality of financial reporting. Boyles Infosys audit committee adopted a charter which meets the requirements of Clause 49 of the Listing Agreement with Indian stock exchanges and SEC. This committee is essential to enhance the credibility of the financial disclosures of the company and promoting transparency. Subrahmanyam o Dr. Iyengar o David L.A qualified and independent audit committee is set by the board of the Infosys. and transparency. Satwalekar. According to Clause 49 audit committee should comprise of non-executive directors. Audit Committee attendance during fiscal 2008 ccc54ccc . Marti G. Chairperson o Prof. and notes the processes and safeguards employed by each. with the majority of them being independent but Infosys audit committee comprises of only independent directors. Omkar Goswami o Rama Bijapurkar o Sridar A. the internal auditors and the independent auditor. The primary objective of the audit committee (the committee) of Infosys Technologies Limited (the Company) is to monitor and provide effective supervision of the Management’s financial reporting process with a view to ensure accurate. Infosys audit committee comprises six independent directors.
severance arrangements. the executive directors and senior management (a) the annual base salary. Subrahmanyam. (c) equity compensation. Effectiveness of the compensation committee can be gauged from how many meetings have been attended by independent directors ccc55ccc . and change in control agreements / provisions. Chairperson o Deepak M. and (e) any other benefits. on the basis of detailed performance parameters set for each of the executive directors at the beginning of the year. Compensation Committee Infosys has established Compensation Committee as per the recommendation Kumar Mangalam Committee recommendation on Corporate Governance. compensation or arrangements. including the specific goals and amount. (b) the annual incentive bonus. Marti G. (d) employment agreements. Its independence can be gauged from the fact that it comprises of 4 independent directors. Lehman The compensation committee annually reviews and approve for the CEO. Satwalekar o Sridar A. The committee.2. in consultation with the CEO also reviews the performance of all the executive directors each quarter. They are: o Prof. Iyengar o Prof. Jeffrey S.
They are: o Claude Smadja. Chairperson o Deepak M. Jeffrey S. Chairperson o Dr. Lehman The purpose of nomination committee is to oversee the Company’s nomination process Identifying. 4. Omkar Goswami o Claude Smadja o Prof. consistent with qualifications and criteria approved by the Board (including evaluation of incumbent directors for potential re-nomination). Nomination Committee Infosys nominations committee comprises of five independent directors.3. Boyles o Prof. Omkar Goswami o David L. and making recommendations to the Board on candidates for: (i) nomination for election or re-election by the stockholders. Jeffrey S. They are: o Rama Bijapurkar. non-executive director and independent director positions. screening and reviewing candidates for executive director. and (ii) any Board vacancies that are to be filled by the Board. Investor Grievance Committee Infosys investor grievance committee comprises of four independent directors. Lehman ccc56ccc . Satwalekar o Dr.
approach & plan for the Infosys Risk Dashboard and measures instituted to mitigate risks from time to time. The committee believes that the Infosys Risk Framework along with risk assessment and reporting methodologies are adequate to cover material risks facing the Company. The committee expresses satisfaction with the Company’s performance in dealing with investor grievances and its share transfer system in its report for the fiscal 2007-08 Details of complaints resolved during the financial year 2007-08 are as follows: 5. Marti G. Boyles. Chairperson o Prof. Subrahmanyam o Claude Smadja o Sridar A. and will strengthen the risk management practices across ccc57ccc .It is appointed to look into share transfer and redressal of shareholder complaints. They are: o David L. Iyengar The committee reviews the Company’s risk management activities on a quarterly basis. These includes review of findings of the Risk Survey for identification of risks. account and project-level risk assessment methodologies. Risk Management Committee Infosys risk management committee comprises of four independent directors.
ccc58ccc . the committee is sufficiently satisfied that it has complied with its responsibilities as outlined in the risk management committee charter. In conclusion.the Company.
for example the transferring of value from one company to another or by inflating numbers. as it would in the case of two independent parties. all such transactions need to happen at an “arm’s length”. Disclosure of related party transactions is essential as Corporate Governance Risk tends to be higher when the transaction is with a related party. Ideally. Related transactions with non-subsidiaries are even more important as they do not get suppressed in consolidated accounts. With respect to related-party transactions. i.cdcdcTRANSACTION RISKScdcdc RELATED PARTY TRANSACTIONS Related party for a company will include directors. one would be particularly concerned about those that are material in nature and can make a significant difference to a company’s assets. subsidiary or relatives. Infosys seems to make adequate disclosure of materially significant related party transactions SUBSIDIARIES Infosys discloses classifies its related party transactions into Capital transactions. management. Loans and ccc59ccc . Yet in the absence of such comprehensive rules and regulations in India. it is common to come across incidences of abuse of related party transactions. Disclosure of related party transactions is necessary but it is not sufficient proof of good corporate governance.. actual loans or even bank guarantees provided.e. Related party transactions can be in the form of sales. liabilities or profits.
salary. contribution to provident fund.e directors and statutory officers relates to only remuneration paid i. commission and sitting fees. Infosys transactions with its key management personnel i. except for those disclosed in the financial statements for the year ended March 31. Also Infosys discloses that there have been no materially significant related party transactions. 2008.Revenue transactions. monetary transactions or relationships between the Company and directors.e. subsidiary or relatives. management. ccc60ccc . It does not include any loan given to them.
The unamortized balance as of March 31. Advances received from clients denote monies received for the delivery of future services. 2007. the obligations under the gratuity plan reduced by Rs. we revised the employee death benefits provided under the gratuity plan. Effective July 1. The details on outstanding options / forward contracts are provided in the notes to the financial statements. An amount of Rs. and included all eligible employees under a consolidated term insurance cover. Pursuant to the Institute of Chartered Accountants of India (ICAI) announcement “Accounting for Derivatives” on the early adoption of Accounting Standard AS 30 “Financial Instruments: Recognition and measurement”. Accordingly. to the extent that the adoption does not conflict with the existing mandatory accounting standards and other authoritative pronouncements. and fixedtime frame contracts for which related costs were not yet incurred. but not encashed by shareholders. 2008 was Rs. ccc61ccc . we have early adopted the standard for the year under review. 2008 were Rs. 116 crore.cdcdcACCOUNTING RISKScdcdc MARK TO MARKET TRANSACTIONS The mark-to-market on options / forward contracts as of March 31. which is being amortized on a straight line basis to the profit and loss account over 10 years. representing the average future service period of employees. 33 crore. 37 crore. Unclaimed dividends represent dividends paid. Unearned revenue consists primarily of advance client billing on fixed-price. 4 crore was amortized during the year. companies law and regulatory requirements.
and are represented by a bank balance of the equivalent amount. ccc62ccc .
finance. and human resources was essential. In 2001. and board matters. the board had sixteen directors. productivity. quality. The CEO. acquisitions. The board members were expected to rigorously ccc63ccc . technology. Expertise in strategy. Generally. hitech software company. employee empowerment and employee retention. The board members were expected to possess the expertise. Infosys believed that the one thing that could help them to improve corporate governance was to bring international professionals on corporate boards (See Table I). brand equity. Infosys had an executive chairman and chief executive officer (CEO) and a managing director.CORPORATE GOVERNANCE —THE INFOSYS WAY Infosys had accepted the recommendation of both the CII and the Kumar Mangalam Birla Committee. skills and experience required to manage and guide a high growth. sales. There were eight executive directors and eight nonexecutive directors (Refer Table I). they were between 40 and 55 years of age and were not related to the other board members. president and chief operating officer (COO). COO. planning. external contacts. profits. They did not serve in any executive or non-executive position in any company in direct competition with Infosys. This section provides an overview of corporate governance practices followed by Infosys. The COO was responsible for all day-to-day operational issues and achievement of the annual targets in client satisfaction. responsibilities and performance. The CEO was responsible for corporate strategy. executive directors and the senior management made periodic presentations to the board on their targets.
attend. The chairman of the board and the company secretary drafted the agenda for each board meeting and distributed it in advance to the board members. The board also met on the occasion of the annual shareholders’ meeting. Each board member was expected to ensure that other existing and planned future commitments did not interfere with the member’s responsibility as a director of Infosys. The board had access to any information that it wanted about the company. Most of the meetings were held at the company’s registered office at Electronics City.prepare for. the board met once a quarter to review the quarterly results and other issues. Board members were free to suggest the inclusion of any item on the agenda. Normally. India. the board meetings were scheduled at least a month in advance. Bangalore. Normally. ccc64ccc . If the need arose. and participate in all board and relevant committee meetings. additional meetings were held. The nonexecutive directors had to attend at least four board meetings in a year.
The nominations committee had four nonexecutive directors who looked after the issue of retirement of existing members and their reappointment. the compensation committee and the audit committee.In 2001.the nominations committee. The nominations committee constantly evaluated the contribution of the members of the board and recommended to shareholders their reappointment. To ensure independence of the board. the members of the nominations committee. on the basis of their performance. The executive directors were appointed by the shareholders for a maximum ccc65ccc . the board had three committees . the compensation committee and the audit committee were all nonexecutive directors.
and a variable component. The shareholders determined the compensation of the executive directors for the entire period of their term. the non-executive ccc66ccc . This sum was within the limit of 0. which had three non-executive directors. Their continuation as members of the board upon superannuation / retirement was determined by the nominations committee. The compensation committee. but were eligible for reappointment upon completion of their term. and a variable amount based on their attendance of the board and committee meetings. The total compensation payable to all the non-executive directors together was limited to a fixed sum per year determined by the board. The compensation of the executive directors consisted of a fixed component that was paid monthly. which was the age of superannuation for the employees of the company. as per the provisions of the Companies Act and as approved by the shareholders.5% of the net profits of the company for the year calculated. It determined and recommended to the board. including the CEO. The annual compensation of the executive directors was approved by the compensation committee within the parameters set by the shareholders at the shareholders meetings. The components were a fixed amount. was 60 years. Since 1999. the compensation payable to the members of the board. The nominations committee adopted a retirement policy for the members of the board under which the maximum age of retirement of executive directors. looked after issues relating to compensation and benefits for board members.period of five years. which was paid quarterly. The compensation payable to the non-executive directors (and the method of calculation) was disclosed in the financial statements. based on performance. The compensation of the non-executive directors was approved at a meeting of the full board.
directors were eligible for stock options. [Source: Annual Report. The committee had full access to financial data. 60% was paid for being on the board and the balance 40% was paid in proportion to the board/committee meetings attended (Refer Table II for compensation payable to non-executive directors in 1999). The committee periodically interacted with the statutory auditors and the internal auditors to ascertain the quality of the company’s transactions. 1998-99] None of the directors gained financially from any other contract of significance which the company or any of its subsidiary undertakings was party to. ensuring financial and accounting controls and compliance with the financial policies of the company. to review the manner in which they were performing their responsibilities. The audit committee was responsible for effective supervision of the financial reporting process. Of the compensation payable for the year 1999. The committee provided overall direction on the risk management policies and also indicated the areas that internal and management audits should focus on. The committee reviewed the annual and half yearly financial statements before they were submitted ccc67ccc . and to discuss auditing. internal control and financial reporting issues.
taking the advice and the help of the CEO. The committee also monitored proposed changes in the accounting policy. Infosys also laid emphasis on succession planning and management development. The chairman and CEO also managed all interaction with the investors. which disclosed the remuneration paid to directors in all forms. including salary. president.to the board. and COO as well as the CFO. stock options. and the government. As per the recommendations of the Kumar Mangalam Committee. he took advice and help from the managing director. benefits. reviewed the internal audit functions and discussed the accounting implications of major transactions. Where necessary. Both the CEO and the COO handled employee communication. The annual report also carried a compliance certificate from the auditors. Infosys included a separate section on corporate governance in its annual report. media. The managing director and COO managed all interactions with the clients. The chairman reviewed succession planning and management development with the board from time to time. ccc68ccc . bonuses.
VINFOSYS-A BENCHMARK FOR CORPORATEV VFVFVGOVERNANCEVFVFV Some analysts felt that Infosys’ corporate governance practices offered many lessons to corporate India. Nandan M Nilekani. Infosys had shown that increasing shareholder wealth and safeguarding the interests of other stakeholders was not incompatible. but also led or served on at least one of the three (Nomination. shareholder value etc. “The strengths are that we have been very successful in creating a value based system with a very strong focus on ethics. what the world is saying on this front. Chief Operating Officer and President of Infosys. in a country where malpractices by founders were rampant. and strong division between personal and professional funds etc. ccc69ccc .” It remained to be seen whether other Indian companies could emulate Infosys form of corporate governance. We believe that we can never stand still. Infosys had given its non-executive directors the mandate to pass judgement on the efficacy of its business plans. Commenting on the strengths and weaknesses of Infosys’ corporate governance. The founders only took salaries and dividends and derived no other financial benefits from the company. We will keep looking at global best practices. That has translated into brand equity. Compensation and Audit) committees. we can do things better. Obviously. Infosys’ founders had set very high standards. said. Managing Director. We keep trying to improve the way we manage to be on par with it. Every non-executive director not only played an active role in decision making.
com/beyondbusiness/sustainability-report.asp http://www.com/investors/corporategovernance/policies.a sp http://www.com/about/awards/default.com/news/video? videoId=99068&videoChannel=10338&refresh=true http://www.in.php?autono=320974 http://www.com/active18/watchnow/watchvid eo_mc.google.infosys.google.asp http://www.com/videoplay? docid=5880150711659106373&ei=ks2iSfjjEYL8 rgK5tLilBw&q=corporate+governance http://www.MMMMMBIBLIOGRAPHYMM MM • http://video.com/beyondbusiness/businesses-conscience/default.reuters.infosys.com/avp/avp.bloomberg.com/videoplay? docid=3185683370541028199&ei=J86iScjQNYq srAKa8YXYDw&q=infosys http://video.asp http://www.infosys.pdf http://www.asp • • • • • • • • • • ccc70ccc .infosys.com/investors/corporategovernance/default.infosys.com/investors/reportsfilings/Memorandum0303.asf http://www.htm? N=video&T=Gopalakrishnan%20Says %20Infosys%20Is%20on%20'Acquisition %20Trail'%20&clipSRC=mms://media2.infosys.com/cache/vu5zGcJgALBk.bloombe rg.
asp http://www.com/investors/corporategovernance/social-responsibility.com/investors/corporategovernance/CodeofConduct.infosys.pdf • • ccc71ccc .asp http://www.com/investors/corporategovernance/report.infosys.• http://www.infosys.
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