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).

Comments
Anbalagan Veerappan
5 years ago
A timely reminder about NDTV!
O S Kempawad
9 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.
Sucheta Dalal
Replied to O S Kempawad comment 9 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
Replied to Sucheta Dalal comment 9 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
9 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...
Sucheta Dalal
Replied to Ankur Bhatnagar comment 9 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
Replied to Sucheta Dalal comment 9 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
Replied to Ankur Bhatnagar comment 9 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... ?
Sucheta Dalal
Replied to Sucheta Dalal comment 9 years ago
I close the discussion with you Mr Bhatnagar.
Ankur Bhatnagar
Replied to Sucheta Dalal comment 9 years ago
Thank you for your replies. It is not common for authors to respond to their commentators. I very much appreciate it.

Best regards and bye.
Ankur Bhatnagar
Replied to Sucheta Dalal comment 9 years ago
I am not saying that you don't hold Murthy to the standards, and I also understand that he gets grilled especially hard because this was not expected of him.

The issue is that the there are already so many articles out there on internet/newspapers who are saying almost exactly the same things. There is nearly nothing new in this article what some 100 others haven't covered.

What I am expecting is an article/journalist who thinks a little differently and takes this opportunity to give the laymen readers an overall context of status of corporate governance in India -- how bad is it, who are the worst guys, who are the good guys, what has been government's attempts in the past, who are the shareholders who are most vociferous in demanding governance, etc. I read your other article too. It gave me a rare insight how these committees work, the pressures they are subjected to and how they deal with that pressure. That made me feel good and more informed.
Sucheta Dalal
Replied to Ankur Bhatnagar comment 9 years ago
If there are a 1000 publications then about 100 of them will report on the event and write similar stuff. They were all written at the same time.
MDT
Replied to Ankur Bhatnagar comment 9 years ago
Dear Mr Bhatnagar,

Thanks for your comments.
We wish you could have read other articles on Moneylife about corporate governance, instead of selective reading, especially on NRN. Here are some articles that explains CG in India...
1. http://www.moneylife.in/article/corporat...
2. http://www.moneylife.in/article/corporat...
3. http://www.moneylife.in/article/corporat...
4. http://www.moneylife.in/article/corporat...

Kindly remember, these are just few of the articles appeared on first page on Moneylife after searching for Corporate governance. You can see more on this subject after search.

Thanks again,
MDT
Jose Koshy
9 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
9 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?
Sucheta Dalal
Replied to Ankur Bhatnagar comment 9 years ago

Spend more time on Moneylife... the answers are all there.
Ankur Bhatnagar
Replied to Sucheta Dalal comment 9 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
Replied to Ankur Bhatnagar comment 9 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
9 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
9 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
9 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
9 years ago
"too much honey is bad for you, and so is trying to win too much praise"
Deepak Sholapurkar
9 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
9 years ago
Let Mr Narayana Murthy not claim to be Holy Cow though paid media media paint him so.
Seshamani
9 years ago
(ego+self-importance)^nrn
R Balakrishnan
9 years ago
Also recall his 'timely' investment in SKS Micro? Unfortunately, a bet that backfired.
Sucheta Dalal
Replied to R Balakrishnan comment 9 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
9 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...
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