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Corporate Governance: Convenience Rules with Infy Too

Mr Murthy and his protégé Nandan Nilekani have always been clever about managing their image. Consider this anecdote of 2005, just two years after the Narayana Murthy Committee had submitted its report to the Securities & Exchange Board of India

NR Narayana Murthy’s return as executive chairman is seen as so positive for Infosys that any talk about the serious breach of good governance norms in the manner of his return, or the appointment of his son, is seen as needless criticism. Well, Mr Murthy and his protégé Nandan Nilekani have always been clever about managing their image. Consider this anecdote of 2005, just two years after the Narayana Murthy committee had submitted its report to the Securities & Exchange Board of India (SEBI). Janardhan Kothari of Kolkata, wrote to me expressing his ‘shock’ and ‘surprise’ that NRN Murthy, as an independent director of NDTV Limited had not attended a single board meeting in his first year. I forwarded the email to Mr Murthy asking if it were true. His response: “That is right. I am guilty. I had told them that my diary gets full a year in advance. I do not cancel appointments once made. That is why I could not attend the meetings. This year, I have attended all the meetings.”

This candour hides the fact that this is a complete violation of the corporate governance code, which places enormous responsibility on independent directors. Couldn’t Mr Murthy have joined the NDTV board a year later? Well, because NDTV was going public and having Mr Murthy on the board before its initial public offering (IPO) would help it extract a good premium from investors. NDTV repaid this debt in full when Mr Murthy was under serious attack from a vengeful HD Deve Gowda (during his son HD Kumarswamy's regime in Karnataka).

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COMMENTS

O S Kempawad

4 years ago

Mrs. Sucheta Dalal,

You got to understand one thing very clearly. Whenever one tries to split on Moon, it comes back on his/her face only.

I have been receiving emails almost every day and there no single day wherein you have not omitted venom against a person who is like SUN. (not moon!)

It seems that the purpose of your existence is to demonstrate that you are only the honest genius person on this planet! Or trying to project yourself a superhuman born to enlighten the society.

But you forget one important thing that is real honest & genuinely genius personalities thinks hundred times before raising fingers towards others. It is because they know when they raise one finger towards others three fingers are towards them.

When it comes to today's email story, you are barking nonsense about NRM using HDD & NDTV! Both these personalities are very well known to the world.

NRM has shown what is honesty, simplicity and novel way of life. Whereas HDD has show what is betrayal, dishonesty and crooked way of life.

Conclusion is you are doing all this nonsense for certain vested interests. After all it is "jamana of PAID MEDIA!"

I know you have set-up this Moneylife as an NGO! AND NGO means a license to loot legally by one or the other ideas. It was a novel activity before but nowadays it has reduced to this level and you are no exception. I am openly saying this on this forum so that let everyone knows.

I know you will now threaten me with legal actions saying you have my IP address etc. You may succeed in doing so even using few corrupt police team, but one you got to understand & remember for ever is SUN always remain SUN.

I know you will never understand this.

REPLY

Sucheta Dalal

In Reply to O S Kempawad 4 years ago

No I wont ... you are entitled to your vested interest and your selective reading of Moneylife. If you were looking for Moneylife Foundation, you are on the wrong page. There is nothing not-for-profit about Moneylife magazine. So again, i can only guess at your selective arrival on this website and your comments. All the best to you.

O S Kempawad

In Reply to Sucheta Dalal 4 years ago

My views are not with vested interests! They are just spontaneous and reflect certain verifiable facts which society knows very well. You have all the rights to reject.

Regarding selective reading / arrival, I will comment only on topics which I find I should comment. It is unreasonable to expect comments on all articles.

Having said that, you should not take my criticism negatively. Yes it does not discredit you from your best intentions to create awareness.

Ankur Bhatnagar

4 years ago

While I am no defender of Murthy, I am trying to understand the brouhaha.

Though NRN's appointment of his son is not really ideal, how bad is it really? How bad is it in the context of general practices in the Indian industry?

Among the founders of large companies, who are the people still at the top in terms of corporate governance? You might say that NRN especially deserves flak because he forcefully upheld the principles of governance in the past. So, are you now punishing him because he was nice? The message is, don't be nice because you get panned the moment you go a little out of line. It is better to keep things convenient right from the beginning.

I had a friend who shaved only on alternate days. I asked him why and he said because people in his office should not get used to of his tidy appearance. It seems that people who shave daily are the ones who get the flak...

REPLY

Sucheta Dalal

In Reply to Ankur Bhatnagar 4 years ago

Ankur... you seem to have returned after a long stint abroad. I can only say, read a lot more that too over a period of five years. I am sure you will understand the brouhaha on governance issues. But again, maybe you wont, in which case you will be with the majority of corporate India who find governance norms a pain anyway!

Ankur Bhatnagar

In Reply to Sucheta Dalal 4 years ago

I am definitely in favour of transparency and governance!

In my above comment, I am genuinely requesting for an article giving us non-experts an overview of status of corporate governance (who are the good guys, who are the bad examples, how bad is the situation, etc. -- these are not rhetorical or cynical questions :-)

I agree that this is a blemish on NRN's record. But since I don't remember so many journalists writing against someone appointing their child for a position, I was wondering if the expressed protests are higher than usual this time.

And if they are, is it more because NRN's blemish on his otherwise spotless white image makes for a stark contrast or is it because the blemish itself is too big and dark?

Sucheta Dalal

In Reply to Ankur Bhatnagar 4 years ago

Am I missing something in your comments? Wont you hold a person by his stated claims about governance standards? And his emphatic statements that the founders' progeny will not come to Infosys? Will you hold them to their proclaimed standards or someone else's?

And look at the flip side -- had they not made these claims and walked the talk at one time ( you seem to have missed my other piece about how Murthy actually walked the talk in 2003) - the same media would not have put them on such a high pedestal and praised them to the sky for being the torchbearers. We would have treated them like any other company. For instance, we have never considered even the Tata group as much of an epitome of good governance as Infosys. So WONT their about turn merit discussion? Please tell me what are you expecting... ?

Jose Koshy

4 years ago

Its governance of convenience, they positioned as Gods of Corporate governance as none of the Indian co's had any, so by just using the Jargon @ a convenient time (as they were planning a NASDAQ listing at that time) made sense. Now that they are No. 3 in Indian IT and down the pecking order if we include Global biggies like IBM/HP/Accenture..none will even listen. Look at the way they did not announce the board meeting agenda to the stock exchange before announcing NRN and some insiders made a killing ! Is this corporate governance ? getting his son in to be EA to be part of strategy ? and claiming he does not have a say..who is joking and to whom ? coming back from retirement as his Catamaran PE fund is bleeding with 40 % of investment underwater..? Is this not a way to resurrect a weak image and come back to relevance....but NRN you are holding on to the straw...all your efforts will only fail like Catamaran as today all MNC's have learnt your arbitrage trick and you will be forced to take deals at LOW MARGINS and compete...or do some smart acquisitions (With NRN's conservative approach..U may not be able to BUY).Good you have Nandan in India government (Was a master stroke to enter Indian market) and you may manage to pull in some India deals by managing the RFP / Tender conditions......

Ankur Bhatnagar

4 years ago

"NDTV repaid this debt in full when Mr Murthy was under serious attack from a vengeful HD Deve Gowda (during his son HD Kumarswamy's regime in Karnataka)."

How did NDTV repay the debt?

REPLY

Sucheta Dalal

In Reply to Ankur Bhatnagar 4 years ago


Spend more time on Moneylife... the answers are all there.

Ankur Bhatnagar

In Reply to Sucheta Dalal 4 years ago

Sucheta, I am relatively new on MoneyLife. It would have been convenient if you had given a link to the appropriate article on MoneyLife. In any case, I believe you about NDTV. It is well known as Congress's mouthpiece. Even my untrained eyes can spot their extra inclination in favour of congress. I just wanted to know more.

Sucheta Dalal

In Reply to Ankur Bhatnagar 4 years ago

Well Ankur, this is an article that appeared in the magazine and uploaded on the net. so links and longer length were not possible. But do make the effort to search... our writing on murthy and on NDTV. There will be a lot for you to learn. Opinions must be formed only after getting all the facts -- which is the job we do without fear or favour unlike large chunks of the media.

Naresh

4 years ago

I do not have much details about SKS. However Microfinance with its huge intermediation cost and small ticket size is the way to start the rural economy without getting any tax payer welfare in between. Microfinance is going to take the rural masses out of poverty coupled with imparting entrepreneurial knowledge on how businesses are created and run. SKS overlent in AP but what I did not like is that the AP legislature instead of protecting property rights (right from being bodily harmed) of borrowers, instead passed a resolution stating that people need not pay up! This dented the microfinance movement since the rule of law no longer exists. Microfinance was a bubble and coupled with incorrect laws passed is now a dead duck. Now its back to the State using tax payers money to do welfare!

SKS I think was a novel concept by Vikram Akula where he spent 50% of the portfolio value in creating a system to administer the rest of the 50% of the capital! Unfortunately the good idea is dead and microfinance is now dead.

The death of microfinance will put additional pressure on the RBI to stretch its failed inclusive banking initiative where non commercial considerations are used to strain profitability of banks by banking in places which frankly are not generating any wealth due to the absence of an entrepreneurial culture. Microfinance would have been the cure to all these ills unfortunately is now dead.

I think Rohan is better off without joining Infosys and should manage the family's massive hedge fund but if the Infosys experience and his one on one training with his Dad works for him and Infosys then why not? I think Infosys is still doing much better in terms of how much pain the management is taking to revive it that I could still bet on their future prospects. In any case as a capitalist you vote with your cash and the induction of NRN into an executive role and his son playing a minor side role has only bolstered capitalist sentiment on the share price. I only pray that Rohan does not use the insider information to do market trades on his Catamaran Investment fund.

jaykayess

4 years ago

It is total stupidity to expect any holy cows in today's three-ring circus of corporate + media + politics.

Nothing is sacred, everything is for sale to the highest bidder, and there is a powerful code of "Omerta" - mutual silence and covering each other's backs.

Scandals only come to light due to some vengeful whistle-blowers who have not got their slice of the pie!

Gunda

4 years ago

I give NDTV a couple of years before it folds up once the present union government is done with. Unless ofcourse it can find fresh investments from the party that it has tried to look after so well in the past 9 years.

MOHAN

4 years ago

"too much honey is bad for you, and so is trying to win too much praise"

Deepak Sholapurkar

4 years ago

with all the attention from media, infy (And NRN)has created a larger that life image.
Now when opportunity has come he is pushing his son in Infy and every one is agreeing.

Babubhai Vaghela

4 years ago

Let Mr Narayana Murthy not claim to be Holy Cow though paid media media paint him so.

Seshamani

4 years ago

(ego+self-importance)^nrn

R Balakrishnan

4 years ago

Also recall his 'timely' investment in SKS Micro? Unfortunately, a bet that backfired.

REPLY

Sucheta Dalal

In Reply to R Balakrishnan 4 years ago

SKS Microfinance was indeed a shocking investment at a big discount to market price, where he seemed to name=lend to enhance SKS's dubious credibility.

What i want to know is the role played by Rohan Murty in this investment. After all, the main stream media claims that his role in family firm Catamaran qualifies him - experience wise to be NRN's Exec Assistant!! But nobody says what he does. Even the CEO of Catamaran -- apparently a buddy of Rohan wont specify to the press.

Meanwhile, I think Mohandas Pai, who has been vocal in every newspaper that called him is not qualified to speak either. He is saying many contradictory things. Maybe I will put it on moneylife blog... gimme some time!

Sushila Pursnani

4 years ago

It was the same with Nandan Nilekani, a big hue and cry was made about his stake buy in Dhanlakshmi bank. 'cause the bank wanted to raise money and had a case filed with the RBI by ex employees about corp governance issues.
The next quarter shareholding pattern had Nilekani's name missing without a whisper

http://articles.economictimes.indiatimes...

Government likely to take more steps to curb gold import: Chief Economic Advisor

“We have taken number of measures to curb the import of gold. The government will never say its end of it,” Chief Economic Advisor Raghuram Rajan said

Within days of hiking import duty on gold, Chief Economic Advisor Raghuram Rajan today said government could take more steps to curb demand for the precious metal amidst widening current account deficit (CAD).

 

“We have taken number of measures to curb the import of gold. The government will never say its end of it,” he told reporters in New Delhi.

 

Last week the government increased import duty on gold to 8%, the second such hike within six months.

 

The monthly gold imports have averaged 152 tonnes in first two months of the fiscal as compared to an average of 70 tonnes seen in the 2012-13 financial year.

 

High gold imports is one of main reasons behind high CAD, which touched a record high of 6.7% of GDP in December quarter of last fiscal. The CAD is likely to be in the range of 5% for the 2012-13 fiscal. As per experts a CAD of 2.5% is sustainable.

 

The high CAD in turn affects rupee value. In early trade, the rupee hit life-time low of 57.54 against the US dollar today.

 

Rajan further said India has a large CAD, and currencies of emerging markets with large CAD have depreciated more.

 

“We are undergoing period of volatility (in rupee)... Obviously in the government, we don’t like to see volatility...  This could be temporary phenomenon,” he said.

 

He, however, said government does not have in mind any specific level at which the rupee should be.

 

The chief economic advisor in the finance ministry also said the medium term measures taken by the government in past will continue and help rupee to find a level consistent with the sustainable growth.

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NCFM certificates: Online renting continues unabated

There is a need to check this spreading menace of renting of NCFM certificates. The most unfortunate part of this renting activity is the reflection of corruption which has spread its tentacles all across the country

NSE Certification in Financial Markets (NCFM) is an online testing and certification program in financial markets. NCFM offers various educational programs in various areas of finance including capital markets, banking, portfolio management, currency, etc. But the criticality of these statements lies in the fact that some of the certifications started by the National Stock Exchange (NSE) have regulatory significance also. 

 

As per NSE guidelines for membership which is available on its website, it is distinctly mentioned that “At any point of time the applicant has to ensure that either the proprietor/one designated director/partner or the Compliance Officer of the applicant entity should be successfully certified either in the Securities Market (Basic) Module or the Compliance Officers (Brokers) Module or the relevant module pertaining to the segments wherein membership of the Exchange has been sought.i.e.

  • Capital Market (Dealers) Module
  • Derivatives Market (Dealers) Module
  • National Institute of Securities Markets (NISM) Series I – Currency
  • Derivatives Certification Examination”

 

The guidelines obviously state the significance of these four certificates. For me the significance of these certificates lies in the fact that I have myself passed more than 10 modules of NSE certifications at different stages and helped many people pass this test. However, what pains me is the fact that these certificates which are supposed to be the benchmark for membership are openly available for renting in the market. There are various advertisements put on websites such as www.quickr.com ,www.olx.com, etc. People publishing these advertisements have the courage to publish the advertisements without any fear. One advertisement from Madurai states that it has wide network of 300 plus sub-brokers and also provides best rate for both buyers and sellers. Many other people are fearless, as well. They share their contact details without any fear. In some of the advertisements, rates are also mentioned which ranges from Rs1,500 a month to Rs3,000 a month.

 

 

There are some groups also created on Facebook’ which facilitate transactions in NCFM certification. Those people who have qualified NCFM certificates openly offer their certificates for rent. This process of renting NCFM certification goes beyond individuals and it is obvious that some middlemen are also involved in this process.
 

But the most important question is how these certificates are getting used if they are being rented. Does this mean that the people using NSE terminals at various locations are not themselves certified and hence need to use these borrowed certificates? If this happens to be case, then isn’t it a clear-cut violation of NSE guidelines? Though modus operandi of using these certificates which are obtained through online renting is not well known, this is how it supposedly works. If a person wants to start a broking firm and does not have a certificate, he borrows it from some person who already has these certificates and shows him as part of the broking organization in some way or other.

 

It is indeed surprising and shocking that such incidents are happening across country. There is a need to check this spreading menace of renting of certificates. The most unfortunate part of this renting activity is the reflection of corruption which has spread its tentacles all across the country.

 

(Vivek Sharma has worked for 17 years in the stock market, debt market and banking. He is a post graduate in Economics and MBA in Finance. He writes on personal finance and economics and is invited as an expert on personal finance shows.)

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COMMENTS

pawan agrawal

4 years ago

who cares in nse for their illegal
brokers are openly cheating investors and listed companies in nse openly violating all the securities laws
in fact, nse itself violating all the rules and regulation of securities laws

Ashok Visvanathan

4 years ago

Dont worry about it.!! When the Madras Stock Exchange members visited the NYSE, they enquired about qualification for membership. They were told there are 3 qualifications required, the first is Money, the second is Money and the 3rd is Money.

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