corp govrn

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ASSIGNMENT

ON

CORPORATEGOVERNANCE

SUBMITTED BY: S.PRIYA PGDM 7A ROLL No. 55


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What happened to Satyam?

When terrorists attacked Mumbai last November, the media called it "India's9/11." That tragedy has been succeeded by another that has been dubbed"India's Enron." In one of the the biggest frauds in India's corporate history,

B. Ramalinga Raju, founder and CEO of Satyam Computers, India's fourth-largest IT services firm, announced on January 7 that his company had beenfalsifying its accounts for years, overstating revenues and inflating profits by$1 billion. Ironically, Satyam means "truth" in Sanskrit, but Raju's admission-- accompanied by his resignation -- shows the company had been feedinginvestors, shareholders, clients and employees a steady diet ofasatyam (oruntruth), at least regarding its financial performance.

Raju's departure was followed by the resignation of Srinivas Vadlamani,Satyam's chief financial officer, and the appointment of Ram Mynampati asthe interim CEO. In a press conference held in Hyderabad on January 8,Mynampati told reporters that the company's cash position was "notencouraging" and that "our only aim at this time is to ensure that thebusiness continues." A day later, media reports noted that Raju and hisbrother Rama (also a Satyam co-founder) had been arrested -- and thegovernment of India disbanded Satyam's board. Though control of thecompany will pass into the hands of a new board, the government stoppedshort of a bailout -- it has not offered Satyam any funds. Meanwhile, a teamof auditors from the Securities and Exchange Board of India (SEBI), whichregulates Indian public companies, has begun an investigation into thefraud. Since Satyam's stocks or American Depository Receipts (ADRs) are

listed on the Bombay Stock Exchange as well as the New York StockExchange, international regulators could swing into action if they believeU.S. laws have been broken. At least two U.S. law firms have filed class-action lawsuits against Satyam, but given the company's precariousfinances, it is unclear how much money investors will be able to recover.

According to experts from Wharton and elsewhere, the Satyam debacle willhave an enormous impact on India's business scene over the comingmonths. The possible disappearance of a top IT services and outsourcinggiant will reshape India's IT landscape. Satyam could possibly be sold -- infact, it had engaged Merrill Lynch to explore "strategic options," but theinvestment bank has withdrawn following the disclosure about the fraud. Itis widely believed that rivals such as HCL, Wipro and TCS could cherry pickthe best clients and employees, effectively hollowing out Satyam. Anotherpossible impact could be on the trend of outsourcing to India, since India'sIT firms handle sensitive financial information for some of the world's largestenterprises. The most significant questions, however, will be asked about


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corporate governance in India, and whether other companies could followSatyam's Raju in revealing skeletons in their own closets.

'Riding a Tiger'

Raju was compelled to admit to the fraud following an aborted attempt tohave Satyam invest $1.6 billion in Maytas Properties and MaytasInfrastructure ("Maytas" is Satyam spelled backwards) -- two firmspromoted and controlled by his family members. On December 16, Satyam'sboard cleared the investment, sparking a negative reaction by investors,who pummeled its stock on the New York Stock Exchange and Nasdaq. Theboard hurriedly reconvened the same day and called off the proposedinvestment.

The matter didn't die there, as Raju may have hoped. In the next 48 hours,resignations streamed in from Satyam's non-executive director and Harvardprofessor of business administration Krishna Palepu and three independentdirectors -- Mangalam Srinivasan, a management consultant and advisor toHarvard's Kennedy School of Government; Vinod Dham, called the "father ofthe Pentium chip" and now executive managing director of NEA Indo-USVentures in Santa Clara, Calif.; and M. Rammohan Rao, the dean of theIndian School of Business in Hyderabad (ISB). Rao had chaired bothDecember 16 board meetings. On January 8, he resigned his position as theISB dean. In a letter to the ISB community, he explained: "Unfortunately,yesterday's shocking revelations, of which I had absolutely no priorknowledge, mean that we are far from seeing the end of the controversy

surrounding Satyam Computers. My continued concern and preoccupationwith the evolving situation are impacting my role as dean of ISB at a criticaltime for the school. Given that my term with ISB anyway ends in a fewmonths, I think that this is an appropriate time for me to step down."

Resigning as Satyam's chairman and CEO, Raju said in a letter addressed tohis board, the stock exchanges and the market regulator Securities &Exchange Board of India (SEBI) that Satyam's profits were inflated overseveral years to "unmanageable proportions" and that it was forced to carrymore assets and resources than its real operations justified. He took soleresponsibility for those acts. "It was like riding a tiger, not knowing how toget off without being eaten," he said. "The aborted Maytas acquisition wasthe last attempt to fill the fictitious assets with real ones."

Specifically, Raju acknowledged that Satyam's balance sheet included Rs.7,136 crore (nearly $1.5 billion) in non-existent cash and bank balances,accrued interest and misstatements. It had also inflated its 2008 secondquarter revenues by Rs. 588 crore ($122 million) to Rs. 2,700 crore ($563


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million), and actual operating margins were less than a tenth of the statedRs. 649 crore ($135 million).

Satyam's auditor PricewaterhouseCoopers issued a terse statement: "Overthe last two days, there have been media reports with regard to alleged

irregularities in the accounts of Satyam.... Price Waterhouse are thestatutory auditors of Satyam. The audits were conducted by PriceWaterhouse in accordance with applicable auditing standards and weresupported by appropriate audit evidence. Given our obligations for clientconfidentiality, it is not possible for us to comment upon the allegedirregularities. Price Waterhouse will fully meet its obligations to cooperatewith the regulators and others."

Impact on 'Brand India'

The outrage over Raju's admission of systematic accounting fraud hasbroadened to wider concern about the potential damage to India's appeal forforeign investors and the IT services industry in particular. Immediatelyfollowing Raju's confession, Satyam's shareholders took a direct hit as thecompany's share price crashed 77% to Rs. 30 (approximately 60 cents), afar cry from its 52-week high of Rs. 544 ($11.35) last May.

"If there were one or two more such accounting scandals in the next sixmonths, it would make international investors more wary," says Whartonmanagement professor Michael Useem. "One example would put people onguard; several examples would be enough to tell big investment money

managers that they have to be especially careful working in that

Useem also warns against overreacting. "Don't assume other firms areguilty," he says. But he considers the situation to be an "alerting call" forinvestors to check where their money is, and for auditors and independentdirectors in all major firms to take a look at the books.

Corporate India has tried to contain the damage so far. RajeevChandrasekhar, president of the Federation of Indian Chambers ofCommerce and Industry, called upon regulators "to move quickly todemonstrate that this is an exceptional case among corporations, and that

investors need not worry about Indian corporate governance and accountingstandards." Suresh Surana, founder of RSM Astute Consulting Group, said ina statement that the Satyam development is "a major eye opener and willbring into renewed and critical focus the role of independent directors,auditors, company management, [the] CFO and other key persons involved."


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"When you have companies that are ostensibly growing their top lines at30%, 40% or 50%, it is possible to paper over things," Singh says. "Satyamwas doing it by boosting sales and profits; Bernie Madoff was doing it byboosting rates of return. When growth rates slow down, you are unable tohide the financial reality of how much cash you actually have. It is possible

that during this slowdown period, more scandals will come to light." (U.S.financier Madoff last month admitted to running a $50 billion Ponzi schemeto keep his hedge fund afloat.)

Singh adds that companies with "the bluest of blue-chip reputations [suchas] Infosys and TCS" could actually gain in the current environment,because of a potential "flight to quality" among client companies. "The third-tier and weaker companies will probably undergo a lot more scrutiny," hesays.

According to Ravi Aron, senior fellow at the Mack Center for TechnologicalInnovation at Wharton, the Satyam fallout could affect India's IT offshoringand outsourcing firms in several ways. An immediate impact could beskepticism on the part of clients about whether Indian IT firms can beentrusted with sensitive financial information. "Clients could begin to ask,'How much do I know about this IT company and its governance?'" saysAron. "Is the IT service provider doing anything that could jeopardize theclient's compliance with FASB, Sarbanes Oxley, Basel II or other financialregulations?"

Aron recommends that before other IT companies get blackballed because of

Satyam's problems, "they should act swiftly to demonstrate that their ownoperations are squeaky clean." Indian IT companies have always hadexceptionally high standards of accounting, and they should ensure that theydo not face any spillover effect, he adds. This has already begun to happen.On the day that Raju came clean, N. R. Narayana Murthy, chief mentor atInfosys, was on Indian television -- distancing Infosys and the rest of the ITindustry from Satyam's practices. Similarly, Vineet Nayar, CEO of HCL, e-mailed a personal letter to the company's clients and associates. DescribingSatyam's disclosures as "unfortunate," the letter added that Nayar would"reaffirm our commitment that we [will] focus on creating value for ourcustomers with the same passion that we have demonstrated in the pastwhile maintaining the highest ethical and governance standards."

Mauro Guillen, a management professor who has studied corporategovernance in emerging economies, believes that Indian business has anadvantage in arguing that the problem is limited to Satyam and is notsystemic. "India is not perceived like Russia -- it is neither everyone'sdarling nor the plague," he says. "This works to the country's advantage


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because it deflects the blame of such occurrences to the way governanceworks in emerging economies rather than to India. What regulators in Indianeed to do in response to Satyam is to find out quickly if other companieshave been doing similar things. The proper response is to deal with anddefuse the problem as soon as possible."

Guillen notes that what makes Satyam's case unusual is that it had listed itsADRs on the NYSE. "Companies in emerging economies have trouble raisingcapital at low costs. The literature shows that is the reason they want to listin the U.S., where they accept a higher level of governance in order to raisecapital at a lower cost. The fact that Satyam listed its ADRs in the U.S. butstill had such serious governance problems makes this case particularlydisturbing."

Guillen adds, though, that India has several well-regarded IT companies. "Ifone or two of them don't make the grade, it should not shake investorconfidence. It shows that investing in emerging markets is risky. Investorsalways balance risks and rewards. If the IT sector in India continues toremain competitive, the Satyam episode will just be a footnote in India'sbusiness story. If the sector becomes uncompetitive, then that would createa serious problem."

Saikat Chaudhuri, a management professor at Wharton, believes the Satyamepisode reveals that the pressure on companies to maintain their financialperformance is immense. "Satyam always wanted to keep up with the BigThree of Indian IT companies -- TCS, Infosys and Wipro," he notes. "At a

time when the IT industry was booming and companies were growingrapidly, it was easy for Satyam to argue that the company was doing welland that it had good governance." The involvement of the board, Chaudhuriadds, was at the "strategic level; in companies like Satyam, it is theowner/promoter/founder who runs the show. It has to do with the ownershipstructure." In Chaudhuri's view, auditors such as PricewaterhouseCoopers,who signed off on the bogus accounts at Satyam, have a lot more to answerfor than the board of directors. "This is a serious lapse on their part. Theyshould have probed."

Chaudhuri's advice to other Indian IT firms is to distance themselves fromthe Satyam fallout through prompt action. "Honesty and transparency willalleviate investor concerns," he says. "I don't believe the sector will comecrashing down. Perhaps Indian IT companies will face more scrutiny in thecoming months; they may have to answer a few more questions, but IndiaInc. will pull through." NASSCOM, the National Association of Software andServices Companies, could play a role in helping communicate that "the
http://www.wharton.upenn.edu/faculty/chaudhuri.htmlhttp://www.wharton.upenn.edu/faculty/chaudhuri.html


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Satyam episode, though it shocked everyone, is an isolated instance," headds.

WorldCom and Tyco, Again

Useem says that if one were to take an inference from recent high-profilescandals outside of India, "there would be a redoubled effort [in India] onthe part of investors and independent directors at other companies to ensurethat nothing like what happened at Satyam happens under their noses."

Useem draws a parallel between what occurred at Satyam with the scandalsat WorldCom and Tyco, rather than at Enron. "At WorldCom, the CFO andthe CEO were knowingly misstating the accounting and financials of the firm;at Tyco, the CEO and the CFO were knowingly taking money from thecompany for personal purposes," he says. "Satyam's disaster has a parallelto these acts of malfeasance."

Useem recalls the CEO and promoter of a Chinese solar panel company who"wanted his company to be extremely well governed" and therefore listed iton the New York Stock Exchange. "He wanted a great board of directors andthus listed the company fully on the NYSE -- not as an ADR -- for the solepurpose ... of forcing himself to be disciplined in the governance policies hiscompany pursues."

If it survives, Satyam may be able to redeem itself with new managementand governance codes, Useem says. He recalls working as a consultant a

couple of years ago with Tyco, where the company's new CEO Ed Breensystematically went about cleaning up after the departure of disgraced CEODennis Kozlowski, instituting strong corporate governance practices. Tyco isone of the best examples of a corporate governance turnaround, Useemnotes.

Singh adds that the Satyam scandal doesn't necessarily warrant moreregulation. "There is no need to strengthen corporate governanceregulations [in India]," he says. "The issue is really more one of leadershipat the board level. The tone gets set by the chairman of the board; it's muchmore a matter of culture within the board room, of the group dynamics

within the board."

Truth in Numbers

Notwithstanding Raju's confession, the Satyam episode has brought intosharp relief the role and efficacy of independent directors. SEBI requires


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Indian publicly held companies to ensure that independent directors makeup at least half their board strength.

The knowledge available to independent directors and even audit committeemembers is inherently limited to prevent willful withholding of crucial

information, Singh notes. "The reality is, at the end of the day, even as anaudit committee member or as an independent director, I would have to relyon what the management was presenting to me," he says, drawing upon hisexperience as an independent director and audit committee member atFedders, a publicly held company in the U.S. that filed for bankruptcy lastyear. "It is the auditors' job to see if the numbers presented are accurate."

Even if outside directors were unaware of the true state of Satyam'sfinances, some red flags should have been obvious. According to Aron,Satyam is one of the world's largest implementers of SAP systems. In aneffort to compete against Satyam, HCL recently acquired Axon, an SAPconsulting firm, at a cost of $800 million. Aron notes that any Satyamdirector should have been puzzled that the company was proposing to invest$1.6 billion in real estate at a time when a competitor as formidable as HCLwas gunning for one of its most lucrative markets. "IT is a highly capital-intensive business, especially in India," says Aron. "What on earth wouldcompel Satyam to invest $1.6 billion in real estate at a time whencompetition with HCL was about to grow more intense? That is what thedirectors should have been asking." Instead, he adds, like the dog that didn'tbark in the Sherlock Holmes story, the matter was allowed to slide.

How effective independent directors can be is mainly a factor of the"dynamics inside the board room once the doors are closed," according toSingh. "There is an attitude in some Indian companies that the boardmembers actually work for the people who have brought them onto theboard. This is a completely misguided attitude. It looks like this may havebeen a problem at Satyam.... The real strength of a healthy board is when aconsensus gets overturned by a dissenting view."

Even if the proposed investment in the two Maytas firms appeared to beethical on first sight, Singh notes that he would have expected theindependent directors to be extra careful. "Given the fact that there is afamily connection involved, as an independent board member I would belooking very hard at whether this is the right decision for the company," hesays. "Also, quite aside from issues of governance, everything we knowabout unrelated diversification [deals] from management literature is that,as a general matter, they are not a good idea; they don't seem to makestrategic sense."


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Independent Defectors

Useem wonders if the Satyam directors who resigned actually did the rightthing. "The leadership dictum is that you need to stay the course, stay in thegame, face the problem and solve the problem," he says. "Did the four

directors who resigned have an option of banding together, staying on theboard and changing governance?" Useem adds that "it is often very hard tostay the course. I am empathetic with people who have difficulty [makingthat decision]."

Media reports quoted former independent director Srinivasan as saying sheaccepted "moral responsibility" for failing to cast a dissenting vote on theMaytas proposal. Some of the other directors who resigned have citeddifficulties in attending frequent board meetings. Useem says it can indeedprove challenging for independent directors to go through reams ofdocuments and attend frequent board meetings that companies in distresstypically have.

In a written response to Knowledge@Wharton, Palepu, Satyam's formernon-executive director, stated that he was not present at the boardmeetings where the Maytas investment proposals were discussed. "As aresult, under Indian law, I was not eligible to vote on the proposals," hesaid. Palepu earned nearly Rs. 1 crore (about $200,000) from Satyam in2007, according to regulatory filings, most of it for rendering "professionalservices." He declined comment, but those services were essentiallyleadership development and consulting for Satyam's top management,

according to Archana Muthappa, the company's head of media relations.

SEBI and India's registrar of companies have launched an investigation intoSatyam. Citing the Indian Securities Contract Regulation Act of 1956, areport in The Economic Times says SEBI is empowered to award penalties ofup to Rs. 25 crore and imprisonment of up to 10 years to directors andmanagement executives "for violating the listing agreement by making falseand inaccurate disclosures in the company's quarterly and annual results."

Singh says it is important to remember who the ultimate victims are in caseslike Satyam. "This is a real tragedy; the people who will be left holding thebag will be the shareholders."

Even as Raju is widely blamed for unleashing "India's Enron," Chaudhuripoints to a major difference between Enron and Satyam. "At Enron, the CEOstonewalled, while whistle-blowers came out with the truth," he says. "AtSatyam, there were no whistle-blowers. The CEO blew the whistle onhimself." In that sense, Raju did -- ultimately -- tell the truth and perhaps


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live up to the "Satyam" name. Unfortunately for him, the company, andIndia's IT industry, by then it was much too late.

Ques 2 Take 3 listed companies and give status of their corporategovernance

Ans 2

RELIANCE

Board composition

The Companys policy is to maintain optimum combination of Executive and Non-Executive

Directors.

The Board consists of 13 Directors, out of which 7 are independent Directors. Thecomposition of the Board and category of Directors is as follows:

Category Name of Directors

Promoter Director Mukesh D. Ambani

Chairman and

Managing Director

Executive Directors Nikhil R. Meswani

Hital R. Meswani

P.M.S. PrasadPawan Kumar Kapil

Non-Executive Non- Ramniklal H. Ambani

Independent Directors Hardev Singh Kohli

Independent Directors Mansingh L. Bhakta

Yogendra P. Trivedi

Dr. Dharam Vir Kapur

Mahesh P. Modi

Prof. Ashok Misra

Prof. Dipak C. JainDr. Raghunath A. Mashelkar

Board Meetings, Board Committee Meetings and Procedures

The Board has constituted seven standing Committees, namely

Audit Committee Corporate Governance and Stakeholders Interface Committee


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Employees Stock Compensation Committee Finance Committee Health, Safety and Environment Committee Remuneration Committee and Shareholders/Investors Grievance Committee.

The Board is authorised to constitute additional functional Committees, from time to time,

depending on the business needs.

(i)Minimum six pre-scheduled Board meetings are held every year. Apart from the above,

additional Board meetings are convened by giving appropriate notice to address the

specific needs of the Company. In case of business exigencies or urgency of matters,

resolutions are passed by circulation.

(ii) The meetings are usually held at the Companys office at Maker Chambers IV, 222,Nariman Point, Mumbai 400021.

(iii) All divisions/departments of the Company are advised to schedule their work plans

well in advance, particularly with regard to matters requiring

discussion/approval/decision at the Board/Board Committee meetings. All such matters

are communicated to the Company Secretary in advance so that the same could be included

in the agenda for the Board/Board Committee meetings.

(iv) The Board is given presentations covering Finance, Sales, Marketing, major business

segments and operations of the Company, global business environment, all business areas

of the Company including business opportunities, business strategy and the risk

management practices before taking on record the quarterly/annual financial results of the

Company.

1. Audit Committee

Composition: The Audit Committee of the Board comprises three independent directors

namely Shri Yogendra P. Trivedi, Chairman, Shri Mahesh P. Modi and

Dr. Raghunath A. Mashelkar. All the members of the Audit Committee possess

financial/accounting expertise/ exposure. The composition of the Audit Committee meets

with the requirements of Section 292A of the Companies Act, 1956 and Clause 49.

Shri Vinod M. Ambani is the Secretary to the Audit Committee.

Objective: The Audit Committee assists the Board in its responsibility for overseeing the

quality and integrity of the accounting, auditing and reporting practices of the Company

and its compliance with the legal and regulatory requirements. The Committees purpose is

to oversee the accounting and financial reporting process of the

Company, the audits of the Companys financial statements, the appointment,independence, performance and remuneration of the statutory auditors, the performance

of internal auditors and the Companys risk management policies.


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Six meetings of the Audit Committee were held during the year ended March 31, 2011, as

against the minimum requirement of four meetings.

2. Corporate Governance and Stakeholders Interface (CGSI) Committee

Composition: The Corporate Governance and Stakeholders Interface Committee of theBoard comprises three Independent Directors, namely, Shri Yogendra P. Trivedi, Chairman,

Dr. Dharam Vir Kapur and Shri Mahesh P. Modi.

One meeting of the Corporate Governance and Stakeholders Interface Committee was held

during the year ended March 31, 2011.

3. Employees Stock Compensation Committee

Composition: The Employees Stock CompensationCommittee of the Board comprises fourDirectors, namely,Shri Yogendra P. Trivedi, Chairman, Shri Mahesh P. Modi, Prof. Dipak C.

Jain and Shri Mukesh D. Ambani.

One meeting of the Employees Stock Compensation Committee was held during the year

ended March 31, 2011.

4. Finance Committee

Composition: The Finance Committee of the Board comprises three Directors, namely, Shri

Mukesh D. Ambani, Chairman, Shri Nikhil R. Meswani and Shri Hital R. Meswani.

Eight meetings of the Finance Committee were held during the year ended March 31, 2011.

5. Health, Safety and Environment (HS&E) Committee

Composition: The Health, Safety and Environment Committee of the Board comprises

three Directors, namely, Shri Hital R. Meswani, Chairman and Dr. Dharam Vir Kapur and

Shri Pawan Kumar Kapil (w.e.f. May 16, 2010).

Four meetings of the Health, Safety and Environment Committee were held during the year

ended March 31, 2011.

6. Remuneration Committee

Composition: The Remuneration Committee of the Board comprises three Independent

Directors, namely, Shri Mansingh L. Bhakta, Chairman, Shri Yogendra P. Trivedi and Dr.

Dharam Vir Kapur.


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Two meetings of the Remuneration committee were held during the year in which all the

members were present.

7. Shareholders / Investors Grievance Committee

Composition: The Shareholders/Investors Grievance Committee of the Board, comprises

four Directors, namely, Shri Mansingh L. Bhakta, Chairman, Shri Yogendra P. Trivedi, ShriNikhil R. Meswani and Shri Hital R. Meswani.

Four meetings of the Shareholders/Investors Grievance Committee (SIGC) were heldduring the year ended March 31, 2011.

Number of Board meetings held and the dates on which held

Eight Board meetings were held during the year, as against the minimum requirement of

four meetings. The Company has held at least one Board meeting in every three months.

The details of the Board meetings are as under:Sl.No. Date Board No. of Directors present

Strength

1. April 23, 2010 13 13

2. May 11, 2010 13 12

3. June 07, 2010 13 07

4. July 27, 2010 13 13

5. October 30, 2010 13 13

6. November 29, 2010 13 13

7. January 21, 2011 13 13

8. February 20, 2011 13 07

ICICI

1. Companys philosophy on code of governanceOur corporate governance policies recognise the accountability of the Board and the importance

of its decisions to all our constituents, including customers, investors, employees and theregulatory authorities, and to demonstrate that the shareholders are the cause of and ultimate

beneficiaries of our economic activities. The functions of the Board and the executive

management are well-defined and are distinct from one another. We have taken a seriesof steps

including the setting up of sub-committees of the Board to oversee the functions of executivemanagement.

These sub-committees of the Board which mainly consists of non-executive directors, meet

regularly to discharge their objectives.


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2. Board of Directors

Our Board consists of eight members, and is responsible for the management of our business.

The Boards role, functions, responsibility and accountability are clearly defined. In addition toits primary role of monitoring corporate performance, the functions of the Board include :

approving corporate philosophy and mission; participating in the formulation of strategic and business plans; reviewing and approving financial plans and budgets;

monitoring corporate performance against strategic and business plans, including overseeing

operations; ensuring ethical behaviour and compliance with laws and regulations;

reviewing and approving borrowing limits;

formulating exposure limits; and

keeping shareholders informed regarding plans, strategies and performance.To enable the Board to discharge its responsibilities effectively, our executive management

places detailed reports on our performance on a quarterly basis.

The composition of our Board reflects the principal shareholdings held by ICICI and therequirements of the Banking Regulation Act, 1949. The following are the members of the Board

:

Shri K. V. KamathNominee Director of ICICI Limited (Promoting Company of the Bank)

having specialized knowledge of finance.Smt. Lalita D. GupteNominee Director of ICICI Limited (Promoting Company of the Bank)

having specialized knowledge of finance

Shri R. RajamaniIndependent Non-Executive Director having specialised knowledge ofbanking, finance and administration

Shri B. V. BhargavaIndependent Non-Executive Director having specialised knowledge of

finance and law Shri Somesh R. SatheIndependent Non-Executive Director having specialised

knowledge of small scale industries Dr. Satish C. JhaIndependent Non-Executive Directorhaving specialised knowledge of agriculture and rural economy

Shri Uday M. ChitaleIndependent Non-Executive Director - a chartered accountant by

professionShri H. N. SinorManaging Director and Chief Executive Officer having specialised knowledge

of banking, finance and administration

The meetings are generally chaired by Shri K. V. Kamath. 15 meetings of the Board (BM) wereheld during the period April 1, 1999 to March 31, 2000. They were held on 22.4.1999,

26.5.1999, 14.6.1999, 23.7.1999, 25.8.1999, 27.9.1999, 27.10.1999, 30.11.1999, 14.12.1999,

27.12.1999, 19.1.2000, 24.1.2000, 9.2.2000, 21.2.2000 and 14.3.2000.

3. Audit and Risk CommitteeThe Audit and Risk Committee consists of five directors, all of which are independent directors.

It provides direction to and oversees the audit and risk management function, reviews the

financial accounts, interacts with statutory auditors and reviews matters of special interest. ShriUday M. Chitale, Smt. Lalita D. Gupte, Shri R. Rajamani, Shri B. V. Bhargava and Dr. Satish C.

Jha are the members of the Committee.

The meetings are generally chaired by Shri Uday M. Chitale. 6 meetings of the Audit and RiskCommittee


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(ARCM) were held during the period April 1, 1999 to March 31, 2000. They were held on

22.4.1999, 23.7.1999, 25.8.1999, 27.9.1999, 30.11.1999 and 21.2.2000.

4. Committee of DirectorsThe Committee of Directors consists of five directors, including the Managing Director and

Chief Executive Officer. This Committee has delegated financial powers and approves loanproposals and expenditures within the broad parameters of the delegated authority.Shri K. V. Kamath, Smt. Lalita D. Gupte, Shri B. V. Bhargava, Shri Uday M. Chitale and Shri H.

N. Sinor are the members of the Committee.

The meetings are generally chaired by Shri K. V. Kamath. 15 meetings of the Committee ofDirectors (CODM) were held during the period April 1, 1999 to March 31, 2000. They were held

on 22.4.1999, 13.5.1999, 26.5.1999,

14.6.1999, 8.7.1999, 23.7.1999, 5.8.1999, 25.8.1999, 27.9.1999, 27.10.1999, 19.11.1999,

30.11.1999, 27.12.1999, 21.2.2000 and 14.3.2000.

5. Compensation Committee

The Compensation Committee consists of four directors, including the Managing Director andChief Executive Officer. The functions of the committee include considering and recommending

to the Board the amount of compensation payable to the executive directors, fees payable to

other directors and framing the guidelines for and management of the employee stock option

scheme.Smt. Lalita D. Gupte, Shri Somesh Sathe, Shri Uday M. Chitale and Shri H. N. Sinor are the

members of the Committee.

The meetings are generally chaired by Smt. Lalita D. Gupte. 4 meetings of the CompensationCommittee (CCM)

were held during the period April 1, 1999 to March 31, 2000. They were held on 22.4.1999,

24.1.2000, 21.2.2000

and 14.3.2000.

6. Nomination Committee

The Nomination Committee consists of four directors, including the Managing Director andChief Executive

Officer. The functions of the committee include the submission of recommendations to the Board

to fill vacancieson the Board or in senior management positions.

Shri K. V. Kamath, Shri R. Rajamani, Shri B. V. Bhargava and Shri H. N. Sinor are the members

of the Committee.

The meetings are generally chaired by Shri K. V. Kamath. 3 meetings of the NominationCommittee (NCM) were held during the period April 1, 1999 to March 31, 2000. They were held

on 22.4.1999, 21.2.2000 and

14.3.2000.

7. Share Transfer Committee

The Share Transfer Committee consists of four directors, including the Managing Director and

Chief Executive Officer. This committee reviews and approves transfers of equity shares anddebentures.


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Smt. Lalita D. Gupte, Shri B. V. Bhargava, Shri Uday M. Chitale and Shri H. N. Sinor are the

members of the committee.

The meetings are generally chaired by Shri B. V. Bhargava. 27 meetings of the Share TransferCommittee (STCM) were held during the period April 1, 1999 toMarch 31, 2000. They were

held on 15.4.1999, 22.4.1999, 13.5.1999,

26.5.1999, 3.6.1999, 29.6.1999, 8.7.1999, 23.7.1999, 5.8.1999, 25.8.1999, 15.9.1999, 27.9.1999,18.10.1999, 27.10.1999, 19.11.1999, 30.11.1999, 20.12.1999, 27.12.1999, 14.1.2000, 19.1.2000,9.2.2000, 21.2.2000, 2.3.2000, 8.3.2000, 14.3.2000, 18.3.2000 and 23.3.2000.

Shri Bhashyam Seshan, Company Secretary, is the Compliance Officer of the Company.

During the financial year ended March 31, 2000, the Company received 2,597 complaints,resolved 2,589 complaints and 8 complaints were pending.

The details of attendance of Directors at the meetings of the Board and various committees of the Board duing

the period from April 1, 1999 to March 31, 2000 were as follows :

Names of the Directors No. of meetings attended

BM ARCM CODM CCM NCM STCM

(15) (6) (15) (4) (3) (27)Shri K. V. Kamath 12 N. A. 11 N. A. 3 N. A.

Smt. Lalita D. Gupte 13 5 13 4 N. A. 20

Shri R. Rajamani 13 5 N. A. N. A. 2 N. A.

Shri B. V. Bhargava 13 5 11 N. A. 3 23

Shri Somesh R. Sathe 15 N. A. N. A. 4 N. A N. A.

Dr. Satish C. Jha 1 1 4 N. A. N. A. N. A. N. A. N.A.

Shri Uday M. Chitale 14 6 15 3 N. A. 24

Shri H. N. Sinor 15 N. A. 15 4 3 24

The previous Annual General Meeting was held on Monday, June 14, 1999 and the last extraordinary general

meeting was held on Monday, February 21, 2000. Smt. Lalita D. Gupte, Shri R. Rajamani, Shri Somesh R. Sathe,

Dr. Satish C. Jha, Shri Uday M. Chitale and Shri H. N. Sinor, Directors, were present at the Fifth Annual General

Meeting. Shri K.V. Kamath, Smt. Lalita D. Gupte, Shri R. Rajamani, Shri B. V. Bhargava, Shri Somesh R. Sathe,

Dr. Satish C. Jha, Shri Uday M. Chitale and Shri H. N. Sinor, Directors, were present at the Third Extraordinary

General Meeting.

INFOSYS

Corporate governance at Infosys is a value-based framework to manage our Company

affairs in a fair and transparent manner. As a responsible corporation, we use this

framework to maintain accountability in all our affairs, and employ democratic and open

processes. We have evolved guidelines and best practices over the years to ensure timely

and accurate disclosure of information regarding our financials, performance, leadership

and governance of the Company.

The Board of Directors (the Board) is at the core of our corporate governance practice and

oversees how the Management serves and protects the long-term interests of all our

stakeholders. We believe that an active, well-informed and independent Board is necessary

to ensure the highest standards of corporate governance.


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The majority of our Board, eight out of 14, are independent members. Further, we have

audit, compensation, investor grievance, nominations and risk management committees,

which comprise independent directors.

Board composition

Size and composition of the Board

The current policy is to have an appropriate mix of executive and independent directors to

maintain the independence of the Board, and to separate its functions of governance and

management. Currently, the Board consists of 14 members, five of whom are executive or

whole-time directors, one is non-executive and eight are independent directors.

Three of the executive directors are our founders. The Board believes that the current size

is appropriate, based on our present circumstances. The Board periodically evaluates the

need for change in its composition and size.

Board meetings

Scheduling and selection of agenda items for Board meetings

Dates for Board meetings in the ensuing year are decided in advance and published as part

of the Annual Report. Most Board meetings are held at our registered office at Electronics

City, Bangalore, India.

Attendance of directors during fiscal 2011

Name of the director No. of meetingsHeld Attended

N. R. Narayana Murthy 5 5

S. Gopalakrishnan 5 5

Prof. Marti G. Subrahmanyam 5 5

Deepak M. Satwalekar 5 5

Dr. Omkar Goswami 5 5

Sridar A. Iyengar 5 5

David L. Boyles 5 5

Prof. Jeffrey S. Lehman 5 5

K. V. Kamath 5 5R. Seshasayee 1 1

K. Dinesh 5 5

S. D. Shibulal 5 5

T. V. Mohandas Pai 5 5

Srinath Batni 5 5

Note: All the above directors attended the Annual General Meeting held on


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Availability of information to Board members

The Board has unfettered and complete access to any information within the Company, and

to any of our employees. At Board meetings, managers who can provide additional insights

into the items being discussed are invited.

Board committees

Currently, the Board has five committees: audit committee, compensation committee,

nominations committee, investor grievance committee and risk management committee.

All committees consist entirely of independent directors.

The Board, in consultation with the nominations committee, is responsible for constituting,

assigning, co-opting and fixing terms of service for committee members. It delegates these

powers to the nominations committee.

The Chairperson of the Board, in consultation with the Company Secretary and the

committee chairperson, determines the frequency and duration of the committee meetings.Normally, all the committees meet four times a year. Recommendations of the committees

are submitted to the entire Board for approval.

The quorum for meetings is either two members or one-third of the members of the

committee, whichever is higher.

1. Audit committee

Our audit committee (the committee) comprises five independent directors :

Deepak M. Satwalekar, Chairperson Prof. Marti G. Subrahmanyam Sridar A. Iyengar K. V. Kamath R. Seshasayee

In India, we are listed on the Bombay Stock Exchange (BSE) and the National Stock

Exchange (NSE). In the U.S., we are listed on the NASDAQ Global Select. In India, Clause 49

of the Listing Agreement makes it mandatory for listed companies to adopt an appropriate

audit committee charter. The Blue Ribbon Committee set up by the U.S. Securities and

Exchange Commission (SEC) recommends that every listed Company adopt an audit

committee charter. This recommendation has also been adopted by NASDAQ.

In our meeting on May 27, 2000, our committee adopted a charter which meets the

requirements of Clause 49 of the Listing Agreement with Indian stock exchanges and theSEC.


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2. Compensation committee

Our compensation committee (the committee) comprises four independent directors.

They are:

K. V. Kamath, Chairperson Prof. Jeffrey S. Lehman David L. Boyles Dr. Omkar Goswami

The purpose of the committee of the Board of Directors (the Board) shall be to discharge

the Boards responsibilities related to compensation of the Companys executive directors

and senior management. The committee has the overall responsibility of approving and

evaluating the compensation plans, policies and programs for executive directors and

senior management.

3. Nominations committee

Our nominations committee (the committee) comprises three independent directors :

Prof. Jeffrey S. Lehman, Chairperson Deepak M. Satwalekar K. V. Kamath

The committee also makes recommendations to the Board on candidates for:

1. Nomination for election or re-election by the shareholders; and

2. Any Board vacancies that are to be filled by the Board.

4. Investor grievance committee

Our investor grievance committee (the committee) comprises four independent directors :

Dr. Omkar Goswami, Chairperson Deepak M. Satwalekar Prof. Marti G. Subrahmanyam R. Seshasayee

5. Risk management committee

Our risk management committee (the committee) is comprised of four independentdirectors:

David L. Boyles, Chairperson Sridar A. Iyengar Dr. Omkar Goswami


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Prof. Jeffrey S. Lehman

corp govrn

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