P a g e | 1

CORPORATE GOVERNACE IN INFOSYS

CHAPTER NO 1. INTRODUCTION

1.1 Back-Ground

 Corporate governance has succeeded in attracting a good deal of public

interest because of its apparent importance for the economic health of

corporations and society in general. However, the concept of corporate

governance is poorly defined because it potentially covers a large number of

distinct economic phenomenon. As a result different people have come up with

different definitions that basically reflect their special interest in the field. It is

hard to see that this 'disorder' will be any different in the future so the best way to

define the concept is perhaps to list a few of the different definitions rather than

just mentioning one definition.

Indian Model of Governance

The Indian corporates are governed by the Company’s Act of 1956 that follows

more or less the UK model. The pattern of private companies is mostly that of

closely held or dominated by a founder, his family and associates

1 | P a g e

P a g e | 2

Meaning

Corporate Governance refers to the way a corporation is governed. It is the

technique by which companies are directed and managed. It means carrying the

business as per the stakeholders’ desires. It is actually conducted by the board of

Directors and the concerned committees for the company’s stakeholder’s benefit.

It is all about balancing individual and societal goals, as well as, economic and

social goals.

2 | P a g e

P a g e | 3

Corporate Governance is the interaction between various participants

(shareholders, board of directors, and company’s management) in shaping

corporation’s performance and the way it is proceeding towards. The relationship

between the owners and the managers in an organization must be healthy and

there should be no conflict between the two. The owners must see that

individual’s actual performance is according to the standard performance. These

dimensions of corporate governance should not be overlooked.

Definitions

1. Corporate governance is a field in economics that investigates how to

secure efficient management of corporations by the use of incentive mechanisms,

such as contracts, organizational designs and legislation. This is often limited to

the question of improving financial performance, for example, how the corporate

owners can secure that the corporate managers will deliver a competitive rate of

return, Encycogov's definition. to see how this definition can be illustrated as a

transaction cost based theory of the managerial agency problem.

2“Corporate governance deals with the ways in which suppliers of finance

to corporations assure themselves of getting a return on their

investment”,The Journal of Finance, Shleifer and Vishny [1997, page

737].

3 Corporate governance is the system by which business corporations are

directed and controlled. The corporate governance structure specifies the

3 | P a g e

P a g e | 4

distribution of rights and responsibilities among different participants in

the corporation, such as, the board, managers, shareholders and other

stakeholders, and spells out the rules and procedures for making decisions

on corporate affairs. By doing this, it also provides the structure through

which the company objectives are set, and the means of attaining those

objectives and monitoring performance", OECD April 1999. OECD's

definition is consistent with the one presented by Cadbury [1992, page

15].

4"Corporate governance - which can be defined narrowly as the

relationship of a company to its shareholders or, more broadly, as its

relationship to society -….", from an article in Financial Times [1997].

5"Corporate governance is about promoting corporate fairness,

transparency and accountability" J. Wolfensohn, president of the Word

bank, as quoted by an article in Financial Times, June 21, 1999.

Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic

growth.

2. Strong corporate governance maintains investors’ confidence, as a result

of which, company can raise capital efficiently and effectively.

3. It lowers the capital cost.

4. There is a positive impact on the share price.

4 | P a g e

P a g e | 5

5. It provides proper inducement to the owners as well as managers to

achieve objectives that are in interests of the shareholders and the

organization.

6. Good corporate governance also minimizes wastages, corruption, risks and

mismanagement.

7. It helps in brand formation and development.

8. It ensures organization in managed in a manner that fits the best interests

of all.

Concept of Corporate Governance

1.1. "Corporations pool capital from a large investor base both in the

domestic and in the international capital markets. In this context, investment is

ultimately an act of faith in the ability of a corporation’s management. When an

investor invests money in a corporation, he expects the board and the

management to act as trustees and ensure the safety of the capital and also earn a

rate of return that is higher than the cost of capital. In this regard, investors expect

management to act in their best interests at all times and adopt good corporate

governance practices.

1.2. Corporate governance is the acceptance by management of the

inalienable rights of shareholders as the true owners of the corporation and of

their own role as trustees on behalf of the shareholders. It is about commitment to

values, about ethical business conduct and about making a distinction between

personal and corporate funds in the management of a company.

5 | P a g e

P a g e | 6

1.2 Objective Of The Study

To Get A Knowledge

To Increase a Knowledge

The help full to the economy

And also profitable to indian country

.

1.3 Significant Of the Study

. To increase my Knowledge

. To know the Indian people

. And Indian country political are also kow about company rules

. That’s after economic are know about corporate governace

. And this is very profitable to economic.

1.4 Problem of Study

. This is secundary data

. This very difficult to put right information

. And this information are ready but very difficult to find out

.And this not sutable to studies

6 | P a g e

P a g e | 7

1.5 Research of Desire

The study of secondary data

Book, News Paper, Articles, etc, are referred to get the relevant

information.

Data obtain to various sources observation are made and accordingly

conclusion is derived

This study is base on the information available for the time period etc.

1.6 Chapter Schemes

Chapter No 1.In this chapter full information about CAPITAL

GOVERNACE

Chapter No 2. Need, Committee And Importants Of Corporate

Governance

Chapter No 3. About Infosys

Chapter No 4. Corporate Governance In Infosys

Chapter No 5. Articales On Corporate Governance In Infosys

Chapter No 6. Oecd Principles On Corporate Governance

Chapter No 7. Recent Policy Steps Taken By Sebi For Ensuring Better

Governance In Listed Companies

Chapter No 8. Conclusion

7 | P a g e

P a g e | 8

CHAPTER NO 2 NEED, COMMITTEE AND

IMPORTANTS OF CORPORATE

GOVERNANCE

2.1 Need For Corporate Governance In India

A corporation is a congregation of various stakeholders, namely customers,

employees, investors, vendor partners, government and society. In this changed

scenario an Indian corporation, as also a corporation elsewhere, should be fair and

transparent to its stakeholders in all its transactions. This has become imperative

in today’s globalized business world where corporations need to access global

pools of capital, need to attract and retain the best human capital from various

parts of the world, need to partner with vendors on mega collaborations and need

to live in harmony with the community. Unless a corporation embraces and

demonstrates ethical conduct, it will not be able to succeed. Corporations need to

recognize that their growth requires the cooperation of all the stakeholders; and

such cooperation is enhanced by the corporations adhering to the best Corporate

Governance practices. In this regard, the management needs to act as trustees of

the shareholders at large and prevent asymmetry of benefits between various

sections of shareholders, especially between the owner-managers and the rest of

the shareholders.

8 | P a g e

P a g e | 9

2.2 The Importance Of Corporate Governance

Corporate governance refers to the rules, procedures, and administration of the

firm’s contracts with itsshareholders, creditors, employees, suppliers, customers,

and sovereign governments. Governance is legally vested in a board of directors

who have a fiduciary duty to serve the interests of the corporation rather than their

own interests or those of the firm’s management.

With this simple definition, we assume that directors and managers are motivated

to serve the interests of the corporation by incentive pay, by their own

shareholdings and reputational concerns, and by the threat of takeover.

The operation of the board and the remuneration of the Executive Directors are

vital in maintaining and protecting the interests of the different stakeholder

groups. If we accept that the shareholders collectively own the business and they

have invested in it to maximise their wealth, then their main aim is to grow the

overall value of their share capital and maximise returns in the form of dividends.

However, there are potential conflicts of interest between this ambition and the

managers/employees of the group who are looking to maximise their own wealth.

Managers are appointed as agents on behalf of the shareholders of the company

who have delegated this responsibility to them.

9 | P a g e

P a g e | 10

In the UK and the US, corporate governance mechanisms emphasise the

relationship between shareholder and management. In countries such as France,

Germany and the Netherland, the corporate governance mechanisms take a

stakeholders’ approach to governance, aiming to balance the interests of owners,

managers, major creditors and employees.

The main mechanisms for understanding corporate governance are the following:

1. The market for corporate control (i.e. a hostile takeover market and the market

for partial control).

2. Large shareholder and creditor monitoring.

3.Internal control mechanisms, i.e. the board of directors, non-

executivecommittees and the design of executive compensation contracts.

4. External mechanisms, i.e. product-market competition, external auditors and

the regulatory framework of the corporate-law regime and stock exchan How

governance affects firm performance? Do firms perform better when

shareholders’ interests are likely to be dominant? Answering these questions, will

lead us to evaluate the folowing points:

10 | P a g e

P a g e | 11

*Corporate control Changes in control due to takeover or insolvency bring

dramatic changes in firm personnel and strategy. CEO and board member

turnover increases radically in the event the firm goes into financial distress.

Managers will avoid being taking over by either increasing the firm’s cash flows

or by some less productive avenue.

*Board, Remuneration Committee, Pay and incentives A research has found that

the appointment of non-executives directors is associated to a company stock

price increases. An Executive that wants to take the company in a direction that

might be more in its personal interests could be sacked. Another research has

found a positive relationship between the percentage of shares owned by

managers and board members and firms’ market-to-book values.

The remuneration committee is made up of non-execs, so this creates a natural

control to stop the executive directors awarding themselves unjustifiable salaries

and benefits. The remuneration of the Directors should be in line with other

similar companies, to remain competitive and retain its top executives.

The remuneration packages are intended to align the interests of Director and

Shareholders by linking cash and share incentives to performance.

11 | P a g e

P a g e | 12

However, some argue that the increase in share price was also associated with a

decline in the value of the firm’s outstanding debt. And corporate performance

cannot be reliably increased simply by adding outsiders to the board of directors

or by increasing the CEO’s stockholdings.

Parmalat- a world leader in the dairy food business, entered bankruptcy protection

in 2003 when investors least expected it. How the Italian group so much praised

siphoned away billions of euros without its shareholders, nor its top managers

suspecting it?

One of the problem at Parmalat was due to its ownership and control structures-

There was a limited presence of shareholders and mainly linked by family ties.

Parmala was a holding company with all the other companies within the group

controlled by the Tanzani family. The family had the majority if not ‘all’ of the

voting rights. As this happens, other shareholders had limited control over the

activities of the group-hence limited power to block any decisions. Managers had

also limited power to influence decisions taken by the family shareholders.

In that case, the family managed to siphoned away almost millions of euros to

other companies owned by the family. In summary, the demise of Parmalat was a

failure to fully implement the corporate governance mechanisms listed above.

12 | P a g e

P a g e | 13

*Statutory auditors Some thought that the Parmalat case was country-specific,

however, Enron the giant American Energy failed victim to corporate governance

problems with the help of Arthur Andersen-the US accounting firm.

2.3 Committee on Corporate Governance

There are various committees formed with a view to reforming the Corporate

Governance in India since 1990s. Some of the recommendations of these

committees are highlighted below.

1. Confederation of Indian Industries (CII) set up a task force in 1995 under Rahul

Bajaj, a reputed industrialist. In 1998, the CII released the code called “Desirable

Corporate Governance”. It looked into various aspects of Corporate Governance

and was first to criticize nominee directors and suggested dilution of government

stake in companies.

2. SEBI had set up a Commission under Kumarmanlagam Birla. This committee

covered issues relating to protection of investor interest, promotion of

transparency, building international tandards in terms of disclosure of

information.

3. The Department of Companies Affairs (DCA) modified the Companies Act,

1956. It undertakes periodic review and brings about amendments in the

13 | P a g e

P a g e | 14

Companies Act, 1956. In 1999, the Act introduced the provision relating to

nomination facilities for shareholders and share buybacks and for formation

of Investor education and protection fund.

4. The Department of Corporate Affairs constituted Naresh Chandra Committee

in 2002. The committee talks extensively about the statuary auditor-company

relationship, rotation of statutory audit firms/partners, procedure for appointment

of auditors and determination of audit fees, true and fair statement offinancial

affairs of companies.

5. SEBI appointed Narayan Murthy Committee in 2002. Its report mainly focuses

on and makes mandatory recommendations regarding responsibilities of audit

committee, quality of financial disclosure, requiring boards to assess and

disclose business risks in the +company’s annual reports.

14 | P a g e

P a g e | 15

CHAPTER NO 3.ABOUT INFOSYS

3.1 The Infosys Story

In 1981, seven engineers started Infosys Limited with just US$250. From the

beginning, the company was founded on the principle of building and

implementing great ideas that drive progress for clients and enhance lives through

enterprise solutions. For over three decades, we have been a company focused on

bringing to life great ideas and enterprise solutions that drive progress for our

clients.

We recognize the importance of nurturing relationships that reflect our culture of

unwavering ethics and mutual respect. It will come as no surprise, then, that 98

percent of our revenue comes from existing clients (as of September 30, 2013).

Infosys has a growing global presence of more than 160,000+ employees

worldwide, 73 offices and 94 development centers in the United States, India,

China, Australia, Japan, Middle East, and Europe.

At Infosys, we believe our responsibilities extend beyond business. That is why

we established the Infosys Foundation – to provide assistance to some of the more

socially and economically depressed sectors of the communities in which we

15 | P a g e

P a g e | 16

work. And that is why we behave ethically and honestly in all our interactions –

with our clients, our partners and our employees.

3.2 History

Established in 1981, Infosys is a NYSE listed global consulting and IT services

company with more than 158,000 employees. From a capital of US$ 250, we have

grown to become a US$ 8.095 billion (LTM Q3 FY14 revenues) company with a

market capitalization of approximately US$ 33 billion.

In our journey of over 30 years, we have catalyzed some of the major changes that

have led to India's emergence as the global destination for software services

talent. We pioneered the Global Delivery Model and became the first IT company

from India to be listed on NASDAQ. Our employee stock options program

created some of India's first salaried millionaires.

Read more about the defining moments in the history of Infosys.

Milestones

2014

Sets up new development center In Araraquara, Brazil The Infosys Prize, offered by the Infosys Science Foundation completes

five years

16 | P a g e

P a g e | 17

2013

Infosys Board appoints N. R. Narayana Murthy as Executive Chairman of the Board

Infosys begins trading on NYSE Euronext London and Paris markets Infosys Edge™ wins the NASSCOM Business Innovation Award for 2013 Infosys presented with ‘2013 Environmental Tracking Carbon Ranking

Leader’ award

2012

Listed on the NYSE market Infosys acquires Lodestone Holding AG, a leading management

consultancy based in Switzerland Forbes ranks Infosys among the world's most innovative companies Infosys among top 25 performers in Caring for Climate Initiative Infosys crosses the US$ 7 billion revenue mark

2011

N. R. Narayana Murthy hands over chairmanship to K.V. Kamath Infosys crosses US$ 6 billion revenue mark, employee strength grows to

over 130,000

2010

Infosys crosses the US$ 5 billion revenue mark

2009

Infosys opens its first development center in Brazil and second Latin American development center in Monterrey, Mexico

Infosys selected as a member of The Global Dow Employee strength grows to over 100,000

17 | P a g e

P a g e | 18

2008

Infosys crosses revenues of US$ $ 4.18 billion Annual net profits cross US$ 1 billion

2007

Infosys crosses revenues of US$ 3 billion. Employees grow to over 70,000 Kris Gopalakrishnan, COO, takes over as CEO. Nandan M. Nilekani is

appointed Co-Chairman of the Board of Directors Opens new subsidiary in Latin America Reports Q2 revenue of over US$ 1billion

2006

Infosys celebrates 25 years. Revenues cross US$ 2 billion. Employees grow to 50,000+

N. R. Narayana Murthy retires from the services of the company on turning 60. The Board of Directors appoints him as an Additional Director. He continues as Chairman and Chief Mentor of Infosys

2005

Records the largest international equity offering of US$ 1 billion from India

Selected to the Global MAKE Hall of Fame

2004

Revenues reach US$ 1 billion Infosys Consulting Inc. is launched

2003

Establishes subsidiaries in China and Australia Expands operations in Pune and China, and sets up a development center

in Thiruvananthapuram

18 | P a g e

P a g e | 19

2002

Touches revenues of US$ 500 million Nandan M. Nilekani takes over as CEO from N.R. Narayana Murthy, who

is appointed Chairman and Chief Mentor Opens offices in the Netherlands, Singapore and Switzerland Sponsors secondary ADS offering Infosys and the Wharton School of the University of Pennsylvania set up

The Wharton Infosys Business Transformation Awards (WIBTA) Launches Progeon, offering business process outsourcing services

2001

Touches revenues of US$ 400 million. Opens offices in UAE and Argentina, and a development center in Japan

N. R. Narayana Murthy is rated among Time Magazine/CNN's 25 most influential businessmen in the world

Infosys is rated as the Best Employer by Business World/Hewitt

2000

Touches revenues of US$ 200 million Opens offices in France and Hong Kong, a global development center in

Canada and UK, and three development centers in the US Re-launches Banks 2000, the universal banking solution from Infosys, as

Finacle™

1999

Touches revenues of US$ 100 million. Listed on NASDAQ Infosys becomes the 21st company in the world to achieve a CMM Level

5 certification Opens offices in Germany, Sweden, Belgium, Australia, and two

development centers in the US Infosys Business Consulting Services is launched

19 | P a g e

P a g e | 20

1998

Starts Enterprise Solutions (packaged applications) practice

1997

Opens an office in Toronto, Canada Infosys is assessed at CMM Level 4

1996

The Infosys Foundation is established

1995

Opens first European office in the UK and global development centers at Toronto and Mangalore. Sets up e-Business practice

1994

Moves corporate headquarters to Electronic City, Bangalore. Opens a development center at Fremont

1993

Introduces Employee Stock Options (ESOP) program Acquires ISO 9001/TickIT certification Goes public

1987

Opens first international office in Boston, US

1983

Relocates corporate headquarters to Bangalore

20 | P a g e

P a g e | 21

1981

Infosys is established by N. R. Narayana Murthy and six engineers in Pune, India, with an initial capital of US$ 250

Signs up its first client, Data Basics Corporation, in New York

3.3 Building Tomorrow’s Enterprise

Opportunities today have become inseparably linked with advances in IT. But we

don’t expend effort to merely give our clients what’s best for them today; we set

our sights on what that effort can grow into tomorrow and beyond. Fortifying

their business and improving the way we live on this planet. We’re about pushing

the limit of what is currently possible. Being audacious with our ideas. And then

executing these ideas to perfection.

Is that ambitious? Of course it is. But we’ve never let challenges prevent us from

trying. And more often than not, we succeed. For instance, we took engineering

design methodology and tools – typically used in manufacturing – to create a

model heart. That heart is now a valuable research and teaching aid, which is

helping save lives – bringing down time to diagnosis and treatment. We were

among the first to make large-scale use of light-weight advanced composites

(instead of metal) to design lighter planes for our client. These airplanes – that

burn 25% less engine fuel – now lead the next generation of commercial aircrafts.

21 | P a g e

P a g e | 22

Our cloud-based solution is enabling cars, the world over, to communicate with

each other and with other devices, in readiness for a world navigated by thinking,

talking, and intelligent automobiles.

There are so many ways in which Infosys is working on tomorrow.

How we squeezed a bank into a mobile

We delivered the technology for a telecom provider to launch a mobile wallet service in India. See cashless payments on the move.

What it took to teach a car to think

They asked if we could design and develop a scalable platform to bring online infotainment services to cars. That set us racing.

22 | P a g e

P a g e | 23

What made the TV two-way

A telecom operator wanted to monetize products and services through the television. Here’s what we did to make teleshopping a hit.

How we put an end to shopping queues

Long check-out queues were driving their shoppers away. Here’s how we kept them shopping for more.

23 | P a g e

P a g e | 24

How virtual holiday shopping became a reality

A leading hotel operator was determined to change consumer behavior on social media from simply 'buzz' to 'buy'. We wanted in on this challenge.

When warnings can make a life-saving difference

24 | P a g e

P a g e | 25

In 2009, a bushfire disaster left 173 dead, 414 injured, 2,000 homes destroyed, and 7,300 people displaced in Australia. We swore to never let that happen again.

CHAPTER NO 4. CORPORATE GOVERNANCE

IN INFOSYS

Meaning

Corporate governance is about maximizing shareholder value legally,

ethically and on a sustainable basis. At Infosys, the goal of corporate governance

is to ensure fairness for every stakeholder – our customers, investors, vendor-

partners, the community, and the governments of the countries in which we

operate.We believe that sound corporate governance is critical in enhancing and

retaining investor trust.It is a reflection of our culture, our policies, our

relationship with stakeholders and our commitment to values.Accordingly, we

always seek to ensure that we attain our performance rules with integrity.

Our Board exercises its fiduciary responsibilities in the widest sense of the term.

Our disclosures 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.

We continue to be a pioneer in benchmarking our corporate governance policies

with the best in the world. Our efforts are widely recognized by investors in India

25 | P a g e

P a g e | 26

and abroad. We have been audited for corporate governance by the Investment

Information and Credit Rating Agency ( ICRA) and the Credit Rating Information

Services of India Limited (CRISIL) and have been awarded a rating of CGR 1 and

GVC Level 1 respectively.

We are also in compliance with the recommendations of the Narayana Murthy

Committee on Corporate Governance, constituted by the Securities and Exchange

Board of India (SEBI).

Corporate Governance Philosophy

Our corporate governance philosophy is based on the following principles:

Satisfying the spirit of the law and not just the letter of the law

Going beyond the law in upholding corporate governance standards.

Maintaining transparency and a high degree of disclosure levels.

Making a clear distinction between personal conveniences and corporate

resources

Communicating externally, in a truthful manner, about how the Company

is run internally

Complying with the laws in all the countries in which the Company

operates

Having a simple and transparent corporate structure driven solely by

business needs

Management is the trustee of the shareholders' capital and not the owner

When in doubt, disclose

26 | P a g e

P a g e | 27

Board composition

At the core of our corporate governance practice is the Board, which oversees

how the management serves and protects the long-term interests of all our

stakeholders. The majority of our Board, nine out of 16, are independent

members. As active and well informed of the board, they are fully committed to

ensuring the highest standards of corporate governance. In addition, the

independent directors make up the audit, compensation, investor grievance,

nominations and the risk management committees, bringing their valuable

perspective to the board.

As a 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 UN Global Compact

Program.

27 | P a g e

P a g e | 28

CHAPTER NO 5. ARTICALES ON

CORPORATE GOVERNANCE IN INFOSYS

5.1 Corporate Governance How New Rules Will Change

Indian Companies

John Samuel Raja D, ET Bureau Jan 8, 2013, 03.32AM IST

The issue of corporate governance in the private sector is a reality and it's time

they live up tothat," says Sachin Pilot, minister of corporate affairs. The 62-year

old law that governs companies is on the cusp of being replaced by new rules,

which the government says will usher in many good practices.

The big picture shows intent, but it's the small details, which will unravel in the

coming year, that will show the government's seriousness to follow through.

Also, adds Jamil Khatri of KPMG: "The challenge is not to introduce new

provisions, but implementation." As we wait for greater clarity, John Samuel Raja

D breaks down the new legislation to show how things will change for companies

—and, by extension, their stakeholders like investors, creditors, auditors and

employees.

28 | P a g e

P a g e | 29

5.2Ambit Puts Infy In The Dock Over Governance

The report, titled 'The underbelly of Indian IT - the ugly, the bad and not so good' hasn't spared other IT companies eitherBibhu Ranjan Mishra & Dev Chatterjee  |  Bangalore  March 28, 2014 Last Updated at 10:00 IST

A new report has raised serious questions on the corporate governance standards

at Infosys, saying board independence at India's second-largest information

technology (IT) services firm might be the weakest among Tier-I entities.

The report, published by brokerage firm Ambit Capital Research, also says the

promoters hold disproportionately high board representation with respect to their

total shareholding in the Bangalore-based company.

"While N R Narayana Murthy, S D Shibulal and S Gopalakrishnan together hold

around 10 per cent in the company, they represent 23 per cent of the voting rights

on the board. With the highest promoter representation and the lowest proportion

of independent directors, Infosys' board independence appears to be the weakest

among Tier-I firms," Ankur Rudra and Nitin Jain said in the report.

ALSO READ: 'The ugly, the bad and the not so good' of Indian IT sector

The report, titled 'The underbelly of Indian IT - the ugly, the bad and not so good'

hasn't spared a few other IT companies, either. While it categorised the

accounting and corporate governance standards at Geodesic, Educomp Solutions

and Financial Technologies (FT) as 'ugly', these at Rolta India and MCX have

29 | P a g e

P a g e | 30

been categorised as 'bad'. Tech Mahindra/Satyam, Infosys and KPIT Technologies

have been classified as 'not so good'.

"While some of these companies (such as FT, Educomp and Geodesic) are

already understood by the market for what they are, others (such as Rolta, MCX,

Infosys, Tech Mahindra and KPIT) are yet to be discounted appropriately by

investors,"itsaid.

When contacted, Infosys said it did not want to comment on the report. While FT

also declined comment, Tech Mahindra said the company had not seen the report

and so was unable to respond. A senior Educomp official said: "We completely

reject the opinion put out in this report, that too on an accounting practice the

company discontinued a little more than two years ago. We will go through this

report and take necessary action against what seems to be an ill-researched and

motivated piece to mislead investors."

A spokesperson for Rolta India said Ambit's was not the correct assessment. "We

have revalued all assets and, in fact, adopted a more conservative policy," he said.

Emails sent to other companies had not elicited any response till the time of going

to press.While talking about Infosys, the report says the company has been

30 | P a g e

P a g e | 31

regarded as a paradigm of corporate governance in India ever since its initial

public offering in 1993. "While this image has earned Infosys goodwill from

investors, clients and employees, there are signs these high corporate governance

standards are fraying. Murthy's entry into Infosys in an executive capacity (even

after the firm's well-articulated policy of executives retiring at the age of 60),

bringing with him his son as an executive assistant, higher promoter

representation at the board and peculiar guidance pattern resulting in

high volatility in share price - none of this gels with Infosys' image of a

leader in corporate governance," it adds.

Infosys co-founder Murthy returned to the company as executive chairman in

June last year, junking his retirement after what he claimed was a crisis call made

to him by the board. This, he said, was done to seek his help in bailing out the

company, which was steadily losing its lustre. However, he joined the company

with a pre-condition to bring his Harvard-educated son, Rohan Murty, his

executive assistant. This was

accommodated by the board.

The Ambit report says the entry of

Murthy, as well as his son, amounts to

breach of corporate policies. "Infosys

has historically followed a well-

31 | P a g e

P a g e | 32

articulated policy of executive retirement at the age of 60, with Murthy himself

being a strong proponent of the policy. Similarly, all the founders have time and

again mentioned about not letting a family manage the business. More surprising

was Rohan Murty's entry into Infosys as the senior Murthy's executive assistant."

Infosys is known for introducing some of the global best corporate governance

practices, including giving quarterly (it has discontinued the practice now) and

annual revenue growth guidance, among other things. The Ambit report, however,

says Infosys has lately been following a peculiar guidance pattern, which is

leading to extreme volatility.

5.3 Infosys is number one for corporate governance practices: IR Global RankingsPTI Dec 13, 2012, 05.22PM IST

BANGALORE: Infosys today said it has been awarded the number one spot

globally for its corporate governance practices by IR Global Rankings (IRGR).

IRGR is the most comprehensive technical ranking system for investor relations

websites, corporate governance practices and financial disclosure procedures,

according to the Bangalore-headquartered company.

The 14th annual edition of the IRGR saw participation from more than 280

companies from 45 countries this year

32 | P a g e

P a g e | 33

CHAPTER NO 6. OECD PRINCIPLES ON CORPORATE GOVERNANCE

Meaning

OECD, in its endeavour to improve the governance practices, had published its

revised principles on Corporate Governance in 2002. The OECD Principles of

Corporate Governance have since become an international benchmark for policy

makers, investors, corporations and other stakeholders worldwide. They have

advanced the corporate governance agenda and provided specific guidance for

legislative and regulatory initiatives in both member and non-member countries.

The Financial Stability Forum has designated the Principles as one of the 12 key

standards for sound financial systems.

Oecd Principles On Corporate Governance Are As

Follows:

Principle I: Ensuring the Basis for an Effective Corporate

Governance Framework

The corporate governance framework

should promote transparent and efficient markets,

be consistent with the rule of law and

33 | P a g e

P a g e | 34

clearly articulate the division of responsibilities among different

supervisory,

regulatory and enforcement authorities

Principle II: The Rights of Shareholders and Key Ownership

Functions protected and facilitated

protect and facilitate the exercise of shareholders’ rights

Principle III: The Equitable Treatment of Shareholders

Should ensure the equitable treatment of all shareholders

opportunity to obtain effective redress for violation of their rights

Principle IV: The Role of Stakeholders in Corporate

Governance- recognized

should recognise the rights of stakeholders

encourage co-operation between corporations and stakeholders in creating

wealth, jobs, and the sustainability of enterprises

34 | P a g e

P a g e | 35

Principle V: Disclosure and Transparency

Timely and accurate disclosure is made on all material matters including

the financial situation, performance, ownership, and governance of the

company.

Principle VI: The Responsibilities of the Board-Monitoring

Management and Accountability to Shareholders

should ensure the strategic guidance of the company,

the effective monitoring of management by the board, and

the board’s accountability to the company and the shareholders

Principle V: Disclosure and Transparency

Timely and accurate disclosure is made on all material matters including

the financial situation, performance, ownership, and governance of the

company.

Principle VI: The Responsibilities of the Board-Monitoring

Management and Accountability to Shareholders

should ensure the strategic guidance of the company,

the effective monitoring of management by the board, and

the board’s accountability to the company and the shareholders

35 | P a g e

P a g e | 36

Indian Corporate Governance Framework is in compliance with the Corporate

Governance principles of OECD.

OECD steering committee on corporate governance reviews the principles and its

compliance by member and non-member countries by conducting regular

thematic peer review of member and non-member countries.

36 | P a g e

P a g e | 37

CHAPTER NO 7. RECENT POLICY STEPS

TAKEN BY SEBI FOR ENSURING BETTER

GOVERNANCE IN LISTED COMPANIES

The introspection that followed the Satyam episode has resulted in some major

changes in Indian corporate governance regime. Some of the recent steps taken in

this regard are as follows:

Disclosure of pledged shares:

It is made mandatory on the part of promoters

(including promoter group) to disclose the details of pledge of shares held by

them in listed entities promoted by them. Further, it was decided to make such

disclosures both event-based and periodic.

Peer review:

In the light of developments with respect to Satyam SEBI

carried out a peer review exercise of the working papers (relating to financial

statements of listed entities) of auditors in respect of the companies constituting

the NSE – Nifty 50, the BSE Sensex and some listed companies outside the

Sensex and Nifty chosen on a random basis.

37 | P a g e

P a g e | 38

Disclosures regarding agreements with the media

companies:

In order to ensure public dissemination of details of agreements entered into by

corporates with media companies, the listed entities are required to disclose

details of such agreements on their websites and also notify the stock exchang of

the same for public dissemination.

Maintenance of website:

In order to ensure/enhance public

dissemination of all basic information about the listed entity, listed entities are

mandated to maintain a functional website that contains certain basic information

about them, duly updated for all statutory filings, including agreements entered

into with media companies, if any.

Compulsory dematerialization of Promoter holdings:

In order to

improve transparency in the dealings of shares by promoters including pledge /

usage as collateral, it is decided that the securities of companies shall be traded in

the normal segment of the exchange if and only if, the company has achieved

38 | P a g e

P a g e | 39

100% of promoter’s and promoter group’s shareholding in dematerialized form.

In all cases, wherein the companies do not satisfy the above criteria, the trading in

securities of such companies shall take place in trade for trade segment;

Peer reviewed Auditor:

It has been decided that in respect of all listed

entities, limited review/statutory audit reports submitted to the concerned stock

exchanges shall be given only by those auditors who have subjected themselves to

the peer review process of ICAI and who hold a valid certificate issued by the

‘Peer Review Board’ of the said Institute;

Approval of appointment of ‘CFO’ by the Audit

Committee:

In order to

ensure that the CFO has adequate accounting and financial management expertise

to review and certify the financial statements, it is mandated that the appointment

of the CFO shall be approved by the Audit Committee before finalization of the

same by the management. The Audit Committee, while approving the

appointment, shall assess the qualifications, experience & background etc. of the

candidate

39 | P a g e

P a g e | 40

Disclosure of voting results:

In order to ensure wider dissemination of

information regarding voting patterns which gives a better picture of how the

meetings are conducted and how the different categories of investors have voted

on a resolution, listed entities are required to disclose the voting results/ patterns

on their websites and to the exchanges within 48 hours from the conclusion of the

concerned shareholders’ meeting.

Enabling shareholders to electronically cast their vote:

In order to enable

wider participation of shareholders in important proposals, listed companies are

mandated to enable e-voting facility also to their shareholders, in respect of those

businesses which are transacted through postal ballot by the listed companies.

40 | P a g e

P a g e | 41

Manner of dealing audit reports filed by listed entities:

SEBI

board has approved a mechanism to process qualified annual audit reports filed by

the listed entities with stock exchanges and Annual Audit Reports where

accounting irregularities have been pointed out by Financial Reporting Review

Board of the Institute of Chartered Accountants of India (ICAI-FRRB). In order

to enhance the

quality of financial reporting done by listed entities, it has been, inter-alia,

decided that:

CHAPTER NO 8. CONCLUSION

Since the late 1990s, significant efforts have been made by the Indian

Parliament, as well as by Indian corporations, to overhaul Indian Corporate

Governance. The current Corporate Governance regime in Indian straddles both

voluntary and mandatory requirements like Voluntary Guidelines by Ministry of

Corporate Affairs. And for listed companies, the vast majority of Clause 49 of the

listing agreements requirements is mandatory.

41 | P a g e

P a g e | 42

The voluntary guideline on Corporate Governance by Ministry of Corporate

Governance is a benchmark for the Corporate Governance practices in the Indian

corporations, and hopefully the corporate world will make the best use of it.

Efforts are also being made by the legislature to amend the Companies Act 1956.

As a result, amendments relating to Corporate Governance are expected to be

brought before Parliament in The Companies Bill 2009. India has one of the best

Corporate Governance legal regimes but poor implementation together with

socialistic policies of the pre-reform era has affected corporate governance.

42 | P a g e