BackDN Prahlad’s appointment to Infosys board makes some shareholders uneasy
The appointment of DN Prahlad, a relative of NR Narayana Murthy, seems to suggest that the founder promoters finally have their man on the Infosys board
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Bengaluru: The appointment of D.N. Prahlad, a relative of founder N.R. Narayana Murthy and a former employee of Infosys Ltd, as an independent director on the company’s board hasn’t gone down well with at least one proxy advisory firm.
Prahlad’s appointment last week seems to suggest that the founder-promoters, none of whom are on the board, finally have their man on it.
“Prahlad certainly seems to be a nominee of the founders," said Shriram Subramanian, founder and managing director of proxy advisory and corporate governance firm InGovern Research Services. “It is clear that by having Prahlad on the board, the founders want access to the board and ability to influence decisions."
Prahlad’s Bengaluru-based firm, Surya Software Systems Pvt. Ltd, also does some business with Infosys.
Infosys maintains that work done by Surya with Finacle, Infosys’s core banking platform, is not large and Prahlad’s appointment is in “compliance with the relevant definition under the Companies Act". That could well be the case.
“The Board receives several inputs from various quarters, and takes decisions solely in the best interest of the Company. These include CEO compensation and inductees to the Board," said a spokeswoman for Infosys.
Murthy did not respond to queries on the appointment.
Subramanian said his firm will surely question Infosys’s decision to appoint Prahlad when the company seeks shareholder approval.
An Infosys executive who spoke on condition of anonymity claimed the appointment of Prahlad was yet another indication of Murthy’s continued influence at Infosys.
“The worrying thing of this appointment of an executive perceived to be close to the founder is what message it sends to the senior leaders at the company," said the Infosys executive. “If the board agrees to have a representative of the founder, then leaders clearly are told who is more important. So, can the CEO really have his team rally around him?"
Current chief executive officer (CEO) Vishal Sikka is Infosys’ first non-founder CEO.
To be sure, Infosys has categorically denied the existence of twin power centres at the company. “First, there is no such twin power centres. That is completely wrong, and that will be very unfair to the promoters," R. Seshasayee, non-executive chairman of Infosys, said in an interview last month. “Because, like I mentioned, Murthy has been an exceptional leader who has chosen to stay away and only give advice when sought from. So it will be utterly wrong (to claim otherwise)."
Seshasayee’s response came against the background of several reports, including in Mint, that said the promoters were unhappy with the high compensation offered to Sikka, the appointment of Punita Kumar-Sinha as an independent director, the high severance package initially offered to former chief financial officer Rajiv Bansal and its subsequent termination.
Seshasayee clarified in the interview that the severance agreement would “be administrated in line with the rights of the parties".
Infosys’s board has Sikka and chief operating officer U.B. Pravin Rao as executive members and eight independent directors. Other than Seshasayee and Prahlad, the other independent directors are Kumar-Sinha, Ravi Venkatesan, John Etchemendy, Jeffrey Lehman, Roopa Kudva and Kiran Mazumdar-Shaw.
Sikka became the firm’s first non-founder CEO in August 2014. Murthy and two other founders, S.D. Shibulal and Kris Gopalakrishnan, decided to voluntarily step down from the board as the founders wanted to quell any speculation of them influencing decision-making at the firm.
Only five of the seven original co-founders—Murthy, Nandan Nilekani, Shibulal, Gopalakrishnan and K. Dinesh—are categorized as promoters of the company, and together they had a 12.75% stake in Infosys as of 30 June.
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