According to InGovern, both Wipro and IDFC are seeking to reappoint independent directors who have served more than the stipulated nine years on their board of directors, which may affect the independence of the directors
Bengaluru-based InGovern Research Services, which provides proxy voting advisory has recommended to vote against reappointment of independent directors at Wipro Ltd and IDFC Ltd at their respective upcoming annual general meetings (AGM).
Wipro, the soap-to-software company has called its AGM on 19th July at Bengaluru. InGovern has recommended to institutional investors to vote for 11 out of the 12 resolutions proposed by Wipro. The advisory firm said in a statement that institutional investors should vote against the reappointment of BC Prabhakar as independent director. "He (Mr Prabhakar) has been on (Wipro) Board for a period of more than 14 years which is in violation of clause 49, annexure ID (1) of the listing agreement that specifies a maximum tenure of nine years. Though the guideline in Clause 49 is non-mandatory, in our opinion, serving as an independent director on the Board of the company beyond nine years is likely to affect their independence," the firm said.
Similarly, InGovern has recommended to also vote against the reappointment of two independent directors, Shardul Shroff and SH Khan, on the board of IDFC. "Mr Shroff was appointed on 1 December 1997 and has been on the board for a period exceeding nine years which is in violation of clause 49, annexure ID (1) of the listing agreement. Mr Khan was appointed on 11 February 1998 and is serving on the board of IDFC for over 13 years. Mr Shroff is also a member of the audit, risk and the compensation committee. In addition, he has attended only 67% of the total board meetings held during the year. We recommend that shareholders vote against the reappointment of directors who attend less than 75% of the Board and/or committee meetings, or have seen not to have contributed to the meetings as per the non-mandatory clause VG I C.1.3 (i) of the Voluntary Guidelines for Corporate Governance issued by the Ministry of Corporate Affairs in December 2009. It is also worth noting that he did not attend the AGM held last year on 28 June 2010," the proxy voting advisory firm said.
In its AGM, IDFC is appointing Deloitte Haskins & Sells (DHS) as auditors. However, in IDFC's books the component of payment for other matters is close to 80% of the audit fees. "The scope of the services they (DHS) render to the company are almost not entirely audit services, hence it could affect their independence. We recommend that shareholders should inquire into this matter and suggest that the details of the other matters be made available in the schedules of the financial statements," InGovern said.
Shriram Subramanian, managing director of InGovern, said, "It is surprising to see that leading companies continue to appoint independent directors whose independence can be seen to be compromised. We believe institutional shareholders should raise these issues at AGMs, so that the quality of corporate governance in India is enhanced."
InGovern Research Services is one of India's leading independent governance analysis firm and assists institutional investors that have financial or reputation exposure to public companies.