Institutional EYE

Commentary on Corporate Governance Issues

Who does Narayana Murthy speak for?

August 23, 2017

 

Narayana Murthy’s public criticism may not necessarily represent that of the Infosys’ entire promoter group. IiAS believes the voting pattern of promoters’ shares in resolutions presented by the company over the past 36 months is unmistakable evidence of an internal difference of opinion.

 

Since Vishal Sikka’s appointment on the Infosys board, the company has had one extra-ordinary general meeting (- in which Vishal Sikka was appointed), three annual general meetings and has approached shareholders five times through a postal ballot.  

 

The voting data from IiAS Adrian in the table shows that the founders have never voted against any resolution. In case they do not acquiesce with what the management proposes, they express their unhappiness by abstaining; all the while vocalization their reservation.

 

Not all founders vote on all resolutions suggesting that they are in not always in sync with each other. Therefore, one could well conclude that not all promoters share Narayana Murthy’s concerns or even support his public criticism of the company and its board. 

 

The issues that Narayana Murthy has been the most vocal on - the appointment of Punita Sinha, the reappointment of Vishal Sikka, and the revision in the compensation paid to UB Pravin Rao, are those not surprisingly, where the promoters have held back their vote. In all the three instances, roughly 75% of the promoter votes were not cast. Yet, the veto has not been unanimous. All three resolutions received 70,773,220 or one fourth of their collective holding supporting these resolutions.  

 

Throughout this period, all the other resolutions found favour with the promoters: between 84.5-100% of their votes were FOR.

 

By the June 2017 Annual General Meeting, there was frostiness over the handling of Rajeev Bansal’s severance package and the allegations regarding the Panaya acquisition. This lead to a discernible shift in the voting with some (not all) promoters: the founders held back from supporting the management on some routine matters. This saw a 42.5% of the founders abstaining. Conversely, the remaining 57.5% of the founders’ vote was cast in favour of the resolutions put to vote: these were the approval of accounts, payment of dividend, re-appointment of UB Pravin Rao, the appointment of Deloitte as auditors and to give power to the board to appoint branch auditors.

 

The voting over this 36-month period shows that even as the public debate over Vishal Sikka and the boards behavior raged, another discussion was taking place, away from the bright lights. And just like there have been strong but opposing views regarding all decisions in public, the founders too have been at odds.

 

You can access the full report by clicking the following link                       

 

 

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