The tussle between the Infosys board and its promoters is a case of generation gap. Founder-chairman NR Narayana Murthy comes across as the dismissive grandfather, but when he questioned the appointment of Punita Kumar Sinha, wife of Union Minister Jayant Sinha, as an independent director on the Infosys board, he raised a pertinent corporate governance issue.
Murthy’s contention was that Infosys vies with its peers for contracts from the Government. With a highly politically connected person on the board, there is a serious issue of conflict of interest. Irrespective of Sinha’s achievements and capabilities, her appointment does put a question mark on Infosys claiming the high moral ground in its practices. Punita Kumar Sinha is said to be on the board of other companies as well.
A politically connected board might make business sense. At the same time, a backlash against crony capitalism and corruption can have an impact on the company’s stocks. In 2011, politically connected stocks fell 49 per cent, more than double the fall in the benchmark Sensex index. Sinha’s appointment is similar to that of Nalini Chidambaram as special counsel of the CBDT to represent the I-T department in a case before the Madras HC when her husband P Chidambaram was Union finance minister.Eyebrows were raised when Arun Sathe, brother of Lok Sabha Speaker Sumitra Mahajan, was appointed on the board of SEBI in 2015.
It can be argued that in real life, independent directors are hardly independent. Not necessarily. When Nusli Wadia, an independent director on some Tata companies for nearly four decades, spoke up against the ouster of Cyrus Mistry, he voiced that important other-view.
Company law in India does have provisions to prevent conflict of interest. Perhaps it is time the law adds another clause: Ministers’ close relatives, who could be privy to sensitive information, should be barred from becoming board members.
Deputy Editor