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Why proxy advisory firms are unhappy on Murthy's comeback

Last updated on: June 4, 2013 11:35 IST

Why proxy advisory firms are unhappy on Murthy's comeback

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Sudipto Dey in New Delhi


The Infosys board's move to recall co-founder N R Narayana Murthy at the helm of affairs hasn't secured favourable reactions from proxy advisory and corporate governance research firms.

A minority investor looking at Infosys from a five-year perspective should be worried, says Shriram Subramanian, founder and managing director, InGovern Research Services.

"Infosys hasn't stood for its espoused principles; it doesn't have an effective board and leadership and succession plans in place," he says.

Amit Tandon, managing director, Institutional Investor Advisory Services, says Murthy's return is a move that turns the clock back for the company.

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Image: Narayana Murthy, Chairman, Infosys Technologies.
Photographs: Savita Kirloskar/Reuters

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"Having trumpeted their corporate governance practices, one expected higher standards from this company," he says.

Executives in many of these firms say they are unsure about the company's future.

J N Gupta, managing director, Stakeholders Empowerment Services (SES), feels the move raises questions on succession planning and issues related to corporate governance.

"This is to do with every shareholder, not just minority shareholders," he says. As the move reflected poorly on the board, shareholders could question the selection of board members, said Gupta.

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Image: Employees talk as they stand next to flex board poster of Infosys founder Narayana Murthy at the Start-up Village in Kochi.
Photographs: Sivaram V/Reuters

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InGovern's Subramanian says the development raises questions on whether investors should rely on the policies stated in an annual report or "should they expect ad-hoc changes when one person feels like it." Most executives from proxy advisory firms said even during tough times, principles should be adhered to.

Subramanian said the reason for bringing a co-founder's family member into the company wasn't clear. "At this juncture, Rohan Murthy neither has the expertise, nor the experience to contribute to an IT services company that is largely about clients, project management and people," he said.

While age was no bar to a person's performance, the company should re-think whether its retirement policy was good enough, said SES's Gupta.


Image: Employees of software company Infosys walk past Infosys logos at their campus.
Photographs: Vivek Prakash/Reuters

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