Last week's decision by Infosys Ltd to appoint D N Prahlad as a board member has riled corporate governance experts, who have argued that it is an early sign of "promoters trying to assert their points in the governance" of the company.
"The regime of completely independent board at Infosys probably has not worked," Shriram Subramanian, founder and managing director of advisory and corporate governance firm InGovern Research Services, said.
Prahlad, a former Infosys employee, is also related to the company's founder N R Narayana Murthy.
Subramanian says this move is an early sign of "promoters trying to assert their points in the governance" of India's second largest software exporter.
Since Vishal Sikka became the first non-founder chief executive, Infosys has seen board members who are outside of the six founders. Infosys's board currently has Sikka and U B Pravin Rao, chief operating officer, as executive members. Apart from Prahlad, other independent directors include R Seshasayee, Prof. Jeffrey S. Lehman, Prof. John W Etchemendy, Kiran Mazumdar-Shaw, Dr. Punita Kumar-Sinha, Ravi Venkatesan, and Roopa Kudva.
Subramanian is apprehensive of Infosys maintaining CEO and the independent board's precedence in decision making going forward. "We are not yet very clear of Prahlad's credentials to be in such a big role as one of the independent directors of a company like Infosys. CEO's value system may have diversions on many occasions in future," he said.
An industry expert looked at it as a "normal course of action" and said that "investors have nothing to be wary of". "Induction of D N Prahlad as one of the independent directors on Infosys board is a normal course of action. I would call it a governance affair and not operational in nature," Rahul Tewari, Had, Technology Investment Banking, ICICI Securities.
"Prahlad's status as an independent director is fully in compliance with the relevant definition under the Companies Act," an Infosys spokesperson said. "To amplify, he is not a relative, nor is the relationship of Surya Software with the Company material, under the said definition."
Some of the recent moves by the company like proposal to pay a hefty severance package to the outgoing chief financial officer Rajiv Bansal, according to Subramanian, did not go down well with the investors. "There was no proper explanation to justify this decision," he said.
Prahlad is the founder and CEO of Surya Software Systems Pvt Ltd and Infosys does some work with the company on the banking and financial services vertical.
Former Infosys board member T V Mohandas Pai, however, says induction of Prahlad, who was his colleague at the company, is an "excellent move"."Prahlad is a senior technology professional and has a deep understanding of the business with intimate knowledge on product market. There is no breach of corporate governance as Prahlad is a very distant relative of Murthy. Prahlad left Infosys in 1995 as a senior vice president. He could have 'practically been on the board of the company, had he stayed with the company," Pai added.