Corporate Governance: Indian Bellwethers Found Lacking In Accountability – Analysis
By Sudip Bhattacharyya*
The happenings at Tata’s and Infosys are not only a matter of concern from the point of view of their future prospects but more so from the angle of corporate governance and accountability.
In a surprise boardroom coup on October 24, Dean Nitin Nohria of Harvard Business School along with other Tata Sons Directors voted to oust the then Tata Sons Chairman Mr. Cyrus Mistry. John C. Coffee, Director of the Centre on Corporate Governance at Columbia Law School, says: “A Dean or University President cannot be an adequate independent director on the board of a company that is a major donor. Tata is a very major donor to HBS and its Dean is thereby compromised.”
Moreover, to raise ethical questions about corporate governance in the context of Nohria’s connection with Ajay Piramal as well as his brother-in-law Amit Chandra (of Bain Capital India), who were brought on the board of Tata Sons just before Cyrus Mistry’s sacking, is only very logical
Further, of the over 50 companies under the Group’s umbrella, only TCS and Tata Motors JLR are doing well. Mistry reportedly wanted to right matters by taking bold, if uncomfortable, decisions that would have diminished Tata’s legacy.
Be that as it may, the reason for removal of a Chairman appointed with much fanfare, as was done in the Tata group, need to be clearly spelt out so that his failings /misdemeanours are identified and accountability fixed. The need for transparency of this high stature company — even if it is in the private sector — can’t be over emphasised.
The allegations against Infosys’ board raise much suspicion of breach of corporate governance and serious lack of transparency. As alleged, the Israeli software company, Panaya was purchased at a mark-up much above the valuation of the company and despite the opposition of the then CFO. Also the reason for the mark-up was reportedly not explained/ recorded anywhere. Further, there are hints at insider trading.
Issues also include the huge severance packages given to two outgoing employees including the then CFO as well as the stratospheric compensation awarded to CEO Vishal Sikka. All this still remain shrouded in mystery.
The company got a clean chit from an independent investigation done by Mumbai-headquartered law firm Cyril Amarchand Mangaldas. The same law firm has been hired to engage with shareholders, including the founders, on governance lapses. Infosys has maintained that it complied with fiduciary duties and adopted good governance norms. It also said that the acquisition was made at a price within the band recommended by Deutsche Bank, the third-party valuer.
All said and done, there comes to the fore the problem of inadequate corporate communication. Firms which talk of corporate social responsibility, and claim the high ground of ethics, have to communicate in a different way to society.
The two companies obviously have so far failed miserably in this respect. They must — much sooner than later — come out of the self-imposed shroud of secrecy and start communicating to shareholders and public clearly and transparently on all their outstanding issues of corporate governance.
*The author is a commentator on contemporary issues in economy, politics and society. Comments and suggestions on this article can be sent to [email protected]
