Solution
Ayan answered on
May 25 2023
WRITTEN ASSIGNMENT
Table of contents
1. What were some of the corporate governance issues that Infosys faced in the past, and how did they impact the company's reputation? 6
Introduction 6
Overview of Infosys 6
Corporate Governance Issues 7
Founders' Involvement 7
Executive Compensation 8
Whistleblower Allegations 8
Impact on Company Reputation 9
Investor Confidence 9
Stakeholder Trust 9
Brand Image 9
Remedial Measures and Rebuilding Trust 10
Conclusion 10
2. How did the resignation of Vishal Sikka as CEO in 2017 raise concerns about the independence of Infosys' board and the role of the company's founders? 12
Introduction 12
Background 12
Resignation of Vishal Sikka 12
Concerns about Board Independence 13
Founders' Role 15
Impact on Governance Structure 15
Steps Taken 15
Conclusion 17
Recommendations 17
3. What were the allegations made by anonymous whistleblowers against Infosys in 2019, and how did the company respond to these allegations? 18
Introduction 18
Allegations Made by Anonymous Whistleblowers 18
Company Response 19
Impact and Rebuilding Trust 20
Stock Price and Financial Performance 20
Investor Confidence 20
Rebuilding Trust 21
Positive Results 22
Conclusion 22
4. How have concerns about executive pay at Infosys been raised in the past, and what actions has the company taken to address these concerns? 23
Introduction 23
Concerns about Executive Pay 23
Disproportionate Compensation 23
Allegations of Excessive Pay 23
Effect on Stakeholder Trust 24
Lack of Transparency 24
Actions Taken by Infosys 25
Positive Results 26
Enhanced Transparency 26
Alignment with Performance 26
Shareholder Satisfaction 26
Improved Governance and Accountability 27
Enhanced Stakeholder Confidence 27
Positive Organizational Culture 27
Conclusion 27
5. What are some of the challenges facing Infosys in terms of board composition and diversity and how is the company addressing these challenges? 29
Introduction 29
Challenges in Board Composition and Diversity 29
Measures Taken to Address Challenges 30
Conclusion 31
6. What steps can companies like Infosys take to ensure that they maintain high standards of corporate governance and manage risks effectively? 33
Introduction 33
Background 33
Governance Best Practices 34
Board Composition and Structure 34
Transparent Reporting 34
Ethics and Compliance 35
Shareholder Engagement 35
Risk Management Strategies 36
Risk Identification and Assessment 36
Risk Mitigation and Controls 36
Monitoring and Reporting 36
Continuous Improvement 37
Conclusion 37
References 39
1. What were some of the corporate governance issues that Infosys faced in the past, and how did they impact the company's reputation?
Introduction
A company's corporate governance is crucial in guaranteeing openness, responsibility, and moral behavior. This part of the study looks at the corporate governance challenges that Infosys, a well-known international information technology business, encountered and how those concerns affected its image. The time period under consideration includes the company's founding and the most recent data as of September 2021.
Overview of Infosys
N.R. Narayana Murthy and a group of six engineers launched Infosys in Pune, India, in 1981. Since then, it has grown to become one of the top consulting and information technology companies in the world. Infosys is an international company with its headquarters in Bangalore, India. It serves clients from a variety of sectors and offers a wide range of services, such as technology consulting, software development, maintenance, and system integration. The company's first focus was on offering services for software development and maintenance to clients worldwide. Over time, Infosys increased the range of services it offered, em
aced new technology, and rose to the top of the world in fields including data analytics, cloud computing, artificial intelligence, and digital transformation (Shikha & Mishra, 2019). For its dedication to technical innovation, quality, and customer happiness, Infosys has established a solid reputation. Its
oad range of services includes those for banking and financial services, healthcare, manufacturing, retail, and telecommunications, among other industries. The company's
oad range of subject experience enables it to provide specialized solutions and handle challenging business issues for its clients. Infosys has offices and delivery centres strategically placed all over the world, covering more than 46 countries in its global footprint. The business has a sizable talent pool made up of knowledgeable individuals from a variety of backgrounds that support its success and foster innovation. Infosys emphasizes long-term collaborations and a thorough comprehension of its clients' business objectives as part of its customer-centric business model. Infosys helps customers change their businesses, increase productivity, and promote sustainable development by drawing on its extensive experience and subject knowledge. Infosys is committed to ensuring client satisfaction in addition to corporate social responsibility (CSR) efforts. The corporation actively participates in a number of CSR initiatives with an emphasis on community empowerment, environmental sustainability, rural development, healthcare, and education. The company's charitable arm, Infosys Foundation, is instrumental in advancing these projects. Infosys is a publicly traded business that is listed on a number of stock markets, including the New York Stock Exchange (NYSE) and the National Stock Exchange of India (NSE). The business has regularly produced good financial results, adding to its credibility as a safe investment choice. For its successes in the IT industry, Infosys has won various awards and acclaim. It has continuously been rated as one of the most admired organizations in the world and praised for its innovation, corporate governance practices, and collaborative workplace environment. Overall, Infosys has solidified its position as a world leader in the consulting and technology industries. The business continues to reshape the digital environment and propel the industry forward with its consistent dedication to innovation, client happiness, and corporate responsibility.
Corporate Governance Issues
Founders' Involvement
In 2017, Infosys had to deal with a serious corporate governance problem because of the founders' engagement in the business' operations. The founders, particularly N.R. Narayana Murthy, expressed concerns about the board's decision-making procedures, business strategy, and governance practices, which led to the development of this problem. The company's founders, who had contributed significantly to its development, expressed their displeasure with several decisions made by the management and board of directors (Chadha & Vashishtha, 2022). The Infosys acquisition strategy was the main source of disagreement. The company's founders expressed doubts about the justification and financial ramifications of several of the company's purchases, raising questions about how well they aligned with shareholders' long-term interests. The founders expressed concerns about a potential weakening of governance norms during conversations concerning the board's independence and autonomy. The stability and credibility of Infosys were significantly impacted by this open conflict between the company's founders and management. It led to uncertainty among investors and stakeholders and generated concerns about the governance framework's efficacy. The disagreement attracted a lot of media coverage and scrutiny, which intensified the perception of governance problems at Infosys. In August 2017, Vishal Sikka, who was the CEO of Infosys at the time, resigned from his post as a result of this conflict. Concerns regarding management effectiveness and leadership stability were made worse by a key executive's resignation. The founders' engagement in Infosys' governance concerns had a noticeable effect on the organization's standing. It cast question on the organization's general stability, governance procedures, and decision-making procedures. Investor confidence was weakened, which resulted in a fall in the stock price and market valuation of the firm. The general opinion of Infosys as a well-run and professionally managed organization suffered, which had an impact on its reputation as a
and and position in the market. Infosys started taking actions targeted at enhancing corporate governance practices in order to address the issues identified by the founders and regain the trust of stakeholders. This includes reorganizing the board, adding new independent directors with appropriate business expertise, and boosting the board's independence and diversity. To guarantee greater monitoring, improved governance, and to reduce any conflicts of interest, these actions were taken. The founders' engagement in Infosys' corporate governance challenges
ought to light the value of efficient governance systems and the necessity of coordinating the interests of all stakeholders. The need of open communication, strong decision-making procedures, and a good balance between the founders' vision and the changing dynamics of a publicly listed firm were all highlighted. The company's
and, investor confidence, and internal dynamics were all significantly impacted by the founders' involvement in the governance concerns at Infosys. The organization then took action to solve these problems in an effort to restore confidence, improve governance procedures, and pave the path for a more secure and open future.
Executive Compensation
Regarding its methods for executive remuneration, Infosys came under fire. When Vishal Sikka served as CEO in 2017, his sizable pay rise caused controversy and raised questions about the equity and openness of the company's remuneration practices. This matter highlighted concerns about how executive compensation relates to business performance and shareholder interests.
Whistleblower Allegations
A whistleblower accusation made in 2019 claimed that Infosys had engaged in unethical behavior, including e
ors in revenue recognition and illegal use of aggressive accounting procedures (Chatterjee & Hazarika, 2020). Investor confidence and the company's market value were impacted by these charges since they raised doubt and damaged the company's image. Despite Infosys being absolved of wrongdoing by an internal probe, the episode highlighted questions about governance and compliance processes.
Impact on Company Reputation
The reputation of the business was significantly impacted by the corporate governance problems Infosys encountered. Concerns about executive pay, founder participation, and whistleblower charges were only a few of the issues that had a significant impact on Infosys' reputation in the market.
Investor Confidence
Investor confidence suffered as a result of the disagreements and governance issues, notably the open conflict between the founders and the management. Investor confidence decreased as a result of the ambiguity around the decision-making procedures, the acquisition strategy, and the leadership stability. This decline in market value and stock price of the firm had an impact on shareholders' perceptions of the company's prospects and long-term growth potential.
Stakeholder Trust
Trust concerns with stakeholders, including as customers, workers, and regulatory agencies, may have a substantial impact. The founders' wo
ies and the accompanying arguments raise questions about the operations of Infosys' openness, accountability, and honesty. This therefore had an impact on the clients' confidence in the company's services. Customers can doubt the business' capacity to uphold confidentiality, provide solutions of the highest cali
e, and uphold moral principles (Kumar et al., 2020). The governance issues may also have had an effect on staff engagement and morale. Employees can be wo
ied about the company's stability, the leadership's capacity to handle difficult events, and the long-term viability of their jobs. As a result, there may be a drop in production, higher attrition rates, and difficulty luring top people. Additionally, regulatory organizations could examine Infosys' governance procedures more extensively, resulting in higher supervision and compliance obligations. Stakeholder confidence may be further impacted as the business may come under further scrutiny to show compliance with moral standards, financial laws, and industry best practices.
Brand Image
The corporate governance problems hurt Infosys'
and because of its reputation for professionalism and ethics. Public arguments, unfavorable media coverage, and the ensuing uncertainty led to the notion that the company's governance standards were weak. The company's reputation as a dependable, trustworthy, and accountable business entity was damaged as a result. Consequences of the influence on Infosys'
and image may be extensive. It can impact the business's capacity to
ing in new customers and keep hold of cu
ent ones. Customers can choose rivals who are viewed as more dependable and steady, which could result in a loss of market share. Additionally, potential workers could be reluctant to work for a business with a poor image, which could harm the business' talent acquisition initiatives. It takes tremendous efforts in terms of open communication, improved governance procedures, and a reaffirmed commitment to moral behavior to restore the
and's reputation and win back stakeholder trust. Infosys took co
ective action to repair its reputation after seeing how crucial it was to solve these issues. The corporate governance issues Infosys ran into ultimately damaged the company's reputation. The loss of investor confidence, the deterioration of stakeholder trust, and the damage done to the
and's reputation underline the critical role that effective governance plays in ensuring an organization's long-term success and survival. By implementing remedial actions and emphasizing accountability and transparency, Infosys aimed to rebuild trust and reestablish its reputation as a reliable corporate entity.
Remedial Measures and Rebuilding Trust
Infosys recognized the importance of addressing the corporate governance issues and took several steps to rebuild trust:
· Strengthening Internal Controls – In order to stop and identify unethical behavior, Infosys put tighter internal control measures in place. This included routine audits, rigorous adherence to accounting guidelines, and a focus on staff education and awareness campaigns to encourage ethical conduct.
· Enhanced Disclosure and Transparency – Infosys put more emphasis on giving stakeholders accurate and timely information (Saraswat & Gupta, 2020). This included revealing acquisition strategy, executive compensation schemes, and compliance controls. The business reaffirmed its dedication to upholding moral principles and following all applicable laws.
· Board Restructuring – In order to improve independence and diversity on the board, the company appointed new directors with substantial business expertise. This was done in order to maintain strict monitoring, hold people accountable, and reduce conflicts of interest.
Conclusion
The reputation of Infosys was significantly impacted by the corporate governance challenges the business encountered, including founder participation, executive remuneration, and whistleblower claims. These difficulties reduced stakeholder and investor trust and harmed the
and's reputation. However, Infosys sought to rebuild confidence and reestablish its reputation as a responsible and ethical corporate organization through co
ective steps concentrated on board reform, more transparency, and tightening internal controls. The company's capacity to win back the trust of its stakeholders and continue on its cu
ent growth trajectory will depend on how well these metrics perform over the long run.
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2. How did the resignation of Vishal Sikka as CEO in 2017 raise concerns about the independence of Infosys' board and the role of the company's founders?
Introduction
Vishal Sikka's resignation as CEO of Infosys in 2017 signalled a critical turning point for the organization and sparked questions about the board's independence and the role of the company's founders. This part of the study intends to investigate the events leading up to Sikka's departure and examine the effects they had on Infosys' governance structure.
Background
A well-known technologist named Vishal Sikka was chosen to lead Infosys as CEO and Managing Director in June 2014 with the goal of fostering innovation and expansion in the face of quick technology improvements. However, internal disputes and disputes with some of the company's founders, especially Narayana Murthy, damaged his tenure.
Resignation of Vishal Sikka
An important turning point in the history of Infosys was marked by Vishal Sikka's departure as the CEO and Managing Director of the business on August 18, 2017. Concerns regarding the independence of the company's board of directors and the role of its founders were raised as a result of the events that led to Sikka's resignation and the effects it had on Infosys.
· Allegations and Whistleblower Complaints: While Sikka and the founders were at odds, claims of fraud and poor corporate governance surfaced. Anonymous whistleblower reports claiming i
egularities in the acquisition of the Israeli software company Panaya were received in Fe
uary 2017. The claims fueled already-existing disagreements and increased criticism of Sikka's leadership and decision-making.
· Relationship with Company Founders: Sikka's time at Infosys was hampered by persistent disputes and clashes with several of the company's founders, especially Narayana Murthy (Sinha & Ajgaonkar, 2020). Murthy, who had left senior positions, openly criticised Sikka's performance and voiced wo
ies about the company's purported degradation of principles and culture as well as corporate governance difficulties. These open disagreements damaged Sikka's relationship with the founders, fostering a climate of mistrust and uncertainty.
· Personal assaults and Constant diversions: Sikka listed personal assaults and diversions as the main causes of his departure in his letter of resignation. Sikka's ability to concentrate on his duties as the CEO was hampered by the constant criticism from some founders and the media attention su
ounding the problems. Sikka's goal of leading innovation and transformation inside Infosys was hampered by the continuous disputes and diversions.
· Follow-Up Reconciliation Efforts: In the wake of Sikka's resignation, Infosys took a number of steps to address the governance issues and restore confidence inside the company. In addition to appointing Nandan Nilekani, a co-founder, as the non-executive chairman of the board, the business also added new independent directors to the board. To repair the strained relationship and
ing stability back to the firm, Infosys launched reconciliation efforts and had talks with the founders.
· Effects on Corporate Governance: Sikka's resignation raised questions about the efficacy and independence of Infosys' board. Despite their non-executive positions, the founders' influence, notably that of Narayana Murthy, created concerns about the board's capacity to make unbiased choices in the organization's and its shareholders' best interests. The episode demonstrated the requirement for a well-balanced governance framework that provides a distinct separation between founder influence and day-to-day operations.
· Impact on investment Confidence: Sikka's departure shocked the business and investment world, which resulted in a sharp decrease in the stock price of Infosys (Chatterjee & Hazarika, 2020). Investors began to have wo
ies about Infosys' stability and long-term prospects due to the uncertainties su
ounding the leadership transfer and their concerns about the governance and strategic direction of the business. The leadership of the corporation realised how crucial it was to win back investor trust.
After Vishal Sikka's resignation as CEO of Infosys in 2017, the business went through a period of tu
ulence and reflection. It
ought to light the difficulties in striking a balance between founder influence and competent management, the relevance of a sound governance structure, and the value of developing a cordial working relationship between the founders, the board, and the executive leadership team. Infosys then took steps to resolve these issues and direct the business in the direction of a more open and secure future.
Concerns about Board Independence
Vishal Sikka's departure as CEO of Infosys in 2017 caused serious questions about the board of directors' impartiality. Despite their non-executive positions, the founders' influence, notably that of Narayana Murthy, and their public clashes with Sikka generated concerns about the board's capacity to act impartially and independently in the company's and its shareholders' best interests. The following are the main issues with board independence that have come up –
· Conflicts with the CEO: Sikka's public disputes with several founders, especially Narayana Murthy, exposed possible conflicts of interest and damaged his relationship with the board. Murthy publicly questioned several business decisions and criticised Sikka's performance, which challenged the board's dynamic. These differences raised concerns about the board's capacity to act impartially and independently.
· Founder Influence: Infosys' founders, who were instrumental in the foundation and early development of the business, have continued to have a substantial amount of power inside the company (Shikha & Mishra, 2019). Their prestige and importance inside the organization allowed them to have significant power over strategic choices while leaving leadership roles. This prompted questions about the board's ability to function independently without excessive founder involvement.
· Impact on supervision and Accountability: An impartial board is essential to ensuring supervision and holding management responsible for its deeds. There were questions regarding the board's ability to ca
y out its supervision duties, especially when disputes and conflicts occu
ed. The board's capacity to fulfil its responsibilities and guarantee effective governance may have been compromised by the tense relationship between the founders and the CEO.
· Need for a Clearly Delineated Role Definition: The episode
ought to light the necessity of a clearly defined division of labour between the founders, board members, and the executive leadership team. A clear governance structure that creates limits and makes sure that everyone involved is aware of their responsibilities is essential to the board's independence. Concerns regarding the board's independence were raised by the unclear position definitions inside Infosys.
· Autonomy in Decision-Making: A key component of corporate governance is the board's capacity to act impartially and in the organization's best interests (Singh & Gupta, 2021). There have been questions regarding the board's independence to decide without interference or undue influence from other parties, such as the founders or other powerful interests. The independence and openness of the decision-making process were questioned.
· Implications for Shareholders: Shareholders depend on an independent board to protect their interests and guarantee the company's long-term prosperity. Investor confidence and faith in Infosys' management were affected by wo
ies about the board's independence. Questions were raised regarding the company's governance procedures and, as a result, shareholder value due to the ambiguity su
ounding the board's autonomy and its capacity to make impartial choices.
Infosys responded to these wo
ies by strengthening the independence of its board and its governance procedures. As part of this, new independent directors were chosen who had a range of skills, accountability and transparency measures were strengthened, and attempts were made to make amends with the founders in order to rebuild harmony and confidence inside the company. These actions attempted to...