Corporate

Governance
Assignment on
Corporate
Governance Models
adopted at TATA
GROUP and INFOSYS
GROUP
Submitted to: Prof. I. Sridhar

Submitted by:

Introduction
Corporate Governance has become a buzzword for the organizations. SEBI
guidelines clause 49 lays emphasis on corporate governance. It becomes
necessary for every organization to achieve high standards of corporate
governance.
When we talk of higher shareholder & stakeholder value, the first name
that comes to our mind is undoubtedly the 'Tatas'. Tata brand stands for
trust and confidence for past several decades. They maintain higher
standards of Corporate Social Responsibility. Tata Code of Conduct, Tata
Business Excellence Model, Global Reporting Initiatives, core values
practiced by the group, all talk volumes about the business excellence
with high standards followed by the Tata Group. Corporate governance is
a way of life at the Tata Group.
The emergence of the Indian software industry offers a unique
experimental setting to ask whether globalization can promote corporate
governance. The answer to this is yes. Corporate governance at one of
India's leading software companies, Infosys, the one most credited with
adopting good corporate governance practices.
Here in this report I will be comparing two corporate giants which are
leading in their corporate governance practices.
Corporate Governance and Management
The complex growth of modern business and emergence of
corporate giants necessitate and require professionalized approach in
governance and management of corporations.

The changing global

corporate scenario also emphasizes that a good management owes not

necessarily to effective organization culture but to a great extent to the

mission, vision and proactive approach of the top management.
The success of an organization greatly depends on the leadership,
human resources and information system, etc. Organizations have to be
well structured and steered by professional managers. The structure of an
organization must suit the mission and should aim at enhancing the
commitment to optimize the resources. Thus, there is need for a value
committed professional organization opportunities for the professional
managers to exemplify their potential for the common objectives of
accomplishing the goal.
technology,

technical

In view of the advancement in information

expertise

coupled

with

professional

vision,

commitment, objectivity, responsiveness and proactive approach can add

to the professionalization of Corporate Governance and Corporate
Management.
Management of Corporate Governance
Managing Corporate Governance is a complicated task as all
corporate may not be professionally managed.

This position becomes

further compounded when confronted with the manner of enforcement of

code of good corporate practices. There is no scope for imposition of such
code of the corporate from the above, but the need to evolve such a code
by the corporate financial institutions themselves is nonetheless relevant
and important for the future of corporate, major stock holders and lenders
of finance, whose nominee directors are on the Boards of assisted
concerns have a proactive role to play though Audit Committees in
evolving a code for incorporate practices to suit our needs and economic
development.
Critical areas for good governance
1. The Board of Directors :

The Board of Directors must

overview the performance, vouch for the accuracy of companys

disclosure

and

disgorge

personal

profits

from

corporate

wrongdoings. The board should contribute substantially in the

performance and growth of the company. The external directors

in the board should be selected purely on the basis of their
experience and expertise.
2. Executive Pay : The executives must be rewarded handsomely
for their contribution to the company. Peter Drucker has long
warned that the growing gap between CEOs and workers could
threaten the very credibility of leadership.
3. Accounting :

Corporate accounting is very important.

The

Auditors should rotate after certain years to ensure a fresh look

by an audit firm. An expanded auditor statement in the Annual
Report should be there instead of just asserting that the
financial

statement

meet

generally

accepted

accounting

principles.
4. Analysts : Analysts should present real position of a company.
They should not play with words and figure and misguide
investors.

Corporate Governance in TATA group

Tata Group has always been a subject of curiosity and interest for a
student of management. Tata Group comprises 96 operating companies in
seven diverse business sectors: information systems and communications;
engineering;

materials;

services;

energy;

consumer

products;

and

chemicals. The Tata Group is one of India's largest and most respected
business conglomerates. Tata companies together employ some 660,800
people. The Group's 28 publicly listed enterprises among them stand
out names such as Tata Steel,Tata Consultancy Services, Tata Motors and
Tata Tea have a combined market capitalization that is the highest
among Indian business houses in the private sector, and a shareholder

base of over 2 million. The Tata Group has operations in more than 54
countries across six continents.
Defined by a deeply rooted set of values and beliefs, corporate
governance in the Tata Groups during their 100-plus years of existence
rests on the twin pillars of trust and integrity.
The House of Tata had progressive and nationalistic outlook right
from the very beginning.

Jamsetji Tata, the Founder of House of Tata

wrote in 1902, five years before the site of the Steel Plant was selected, to
his son Dorabji Tata :
Be sure to lay wide streets planted with shady trees, every other of
a quick-growing variety. Be sure that there is plenty of space for lawns
and gardens. Reserve large areas for football, hockey and parks. Earmark
areas for Hindu temples, Mohammedan mosques and Christian churches.
We do not claim to be more unselfish, more generous or more
philanthropic than other people. But we think; we started on sound and
generous business principles considering the interests of the shareholders
as our own, and the health and welfare of the employees, the sure
foundation of prosperity.
Tata Group has always given paramount importance to Corporate
Governance. They have always believed in the philosophy of leadership
with trust.

Five Core Values:

Tata group has always been a value-driven

organization. Let us discuss in brief the five core values underpinning the
Tata way of business:
Integrity : Tata believe that they must conduct the business
with honesty and transparency. Everything they do must stand
the test of public scrutiny.

 Understanding : Tata believe in showing care, respect,

compassion and humanity for its colleagues and customers
around the world and always work for

the benefit of the

communities they serve.

Excellence : Tata make a conscious effort to achieve the
highest possible standards in the day-to-day work and in the
quality of the goods and services they provide.
Unity : Tata believe that they must work cohesively with the
customers and partners around the world, building strong
relationships based on tolerance, understanding and mutual
cooperation.
Responsibility : Tata continue to be responsible, sensitive to
the countries, communities and

environment in which they

work, always ensuring that what comes from the people goes
back to the people many times over.
Vision
By 2025, 25% of the worlds population will experience the Tata
commitment to improving the quality of life of customers and
communities. As a result, Tata will be amongst the 25 most admired
corporate and employer brands globally, with a market capitalisation
comparable

to the 25 most valuable companies

in

the world.

Mission
To improve the quality of life of the communities we serve globally
through long-term stakeholder value creation based on Leadership with
Trust.

Corporate Governance in practice:

For

any

organization

to

ensure

that

corporate

governance

penetrates deep into all its branches, it important to break the 'vicious
circle' and create a 'virtuous

circle', wherein there is greater

accountability and responsibility towards all the stakeholders. One Senior

Manager at Tata Sons says that Don't wait for the law to change.

It is

not mere compliance to the law, but to excel in value. Tatas do not merely
believe in lip-service. We believe in adoption through conviction, practice
and respect.
Tata initiated various labour welfare laws, like the establishment of
Welfare Department was introduced in 1917 and enforced by law in 1948
or Maternity Benefit was introduced in 1928 and enforced by law in 1946.
The shareholders form the topmost rung, followed by the Board of
the Directors and then the Management. The Board of Directors do not
believe in interference in the day-to-day working of the companies, but
practice complete oversight. The responsibility of the Board of Directors is
'Balancing the needs and requirement' which includes, Directional,
Operational and Structural overview of the companies.
Tata Steel will celebrate 100 years of existence in 2007. It won't be
just a milestone in the company's history, it will be a milestone of
corporate transparency and generosity in India.

Corporate Governance Model

Baldrige Model
Management

Tata Values

Indian

The Corporate Governance Model at the Tata Group is based on the

three important foundations viz.

The Baldrige model, from which the

TBEM is evolved, Tata Values, which are virtuously followed by the Tata
companies and the Indian Management Practices, because Tata is a truly
Indian company.

Management Structure:
There are two decision-making bodies that define and direct the
business endeavors of the Tata Group. These are called the Group
Executive Office and the Group Corporate Centre.
Group Executive Office : The Group Executive Office (GEO) defines and
reviews the business activities of the Tata Group and is involved in
implementing programmes in corporate governance, human resources,
the environment, etc. The chief objective of the GEO is to make the Tata
Group more synergistic; it does this by strengthening the relationship
between the Group and its companies. The GEO assesses what unique
value a company adds to a particular business sector and conversely,
what unique value the Group can bring to that company. Besides Group
chairman Ratan Tata, the GEO comprises R. Gopalakrishnan, Ishaat
Hussain, Kishor Chaukar, Arun Gandhi and Alan Rosling.
Group Corporate Centre : The mandate of the Group Corporate Centre
(GCC) is to guide the future strategy and direction of the Tata Group and
to work in close coordination with the Group Executive Office. The GCC
comprises Ratan Tata, N.A. Soonawala, J J Irani, R.K. Krishna Kumar, R.
Gopalakrishnan, Ishaat Hussain, Kishor Chaukar, Arun Gandhi and Alan
Rosling.

GCC is the apex body that reviews group operations once every

month.
Tata Code of Conduct:

All

the

adopted Tata code of conduct (TCOC).

Tata

companies

have

formally

TCOC has 25 clauses which lay

down the code of conduct for the employees. Any proven violation from
the TCOC is viewed seriously. At Tata Steel, one of the employees was

dismissed from the company for violation of the code of conduct.

The

news was widely publicized though the name of the employee was not
revealed.
TCOC is implemented extensively and seriously at Tata is amply
supported by the fact that, one of the executives at Tata Steel stated, I
received an honorarium of Rs. 2000 for delivering a lecture in one of the
prestigious management institute.

I proactively asked the ethics

counselor whether I could accept such payment. I did not want to violate
the code of conduct even by mistake. I strongly believe in the ethics of
the company.
The booklet of TCOC is given to each employee of the Tata group. There is
an ethics counselor in every Tata company. The chief executive officer of
a Tata company is also its chief ethics officer. Violations of TCOC can be
brought to the attention of Ethics Counselors, by raising concerns.
Concerns received are addressed and corrective actions are taken and
communicated.
Tata Code of Conduct Issues Covered
National Interest
Financial reporting and records
Competition (support for open market economy)
Equal opportunities employer
Gifts and donations (employees shall neither receive nor offer or
make, directly or indirectly, any illegal payments, remuneration,
gifts, donations or comparable benefits which are intended to or
perceived to obtain business or uncompetitive favours for the
conduct of business)
Government agencies (Not to offer or give any company funds
or property as donation to any government agencies or their
representatives...)
Political non-alignment
Health, safety and environment

 Quality of products and services

Corporate citizenship (compliance of all relevant laws... and
actively assisting in the improvement of the quality of life)
Cooperation of Tata companies
Public representation of the company and the group
Third party representation
Use of the Tata brand
Group Policies
Shareholders
Ethical conduct
Regulatory compliance
Concurrent employment
Conflict of interest
Securities transactions and confidential information
Protecting company assets
Citizenship
Integrity of data furnished
Reporting concerns
Global Reporting Initiative :
GRI was a project of the UN Environment Programme. GRI is now a
permanent independent organization.

It emphasizes on TBL i.e. Triple

Bottom Line approach : financial, social and environmental.

The Tata Group is a signatory to the Global Compact issued by the
Secretary General of the United Nations in 1999.

Tata has a person

designated to help Tata companies prepare these TBL reports. Tata Steel
is one of the first companies in India to adopt triple bottom line
performance reporting in its Corporate Sustainability Report.
Tata Business Excellence Model (TBEM) : It is a Total Quality
Management Model, based on the Malcolm Baldrige National Quality
Award, USA.

The model works under the aegis of Tata Quality

Management Services (TQMS). TQMS acts as a facilitator for many Tata

companies to excel in business performance. It works on two tools i.e.

TBEM and Tata Code of Conduct. It further led to the institution of the JRD
Quality Value Awards in the year 1995, in order to create awareness of the
importance of quality and the need for total customer satisfaction.

All

Tata Group companies are encouraged to volunteer for evaluation for the
award.
For TCS, Indias largest software company, quality is not the mere
absence of defects, but the complete satisfaction for all its stakeholders.
Golden Peacock Awards :
The Golden Peacock Global Award for Corporate Governance was
instituted by the World Council for Corporate Governance in January 2001
to foster competitiveness among businesses to improve the quality of
Corporate Governance. The criteria include overview of governance
structure

(policies

and

organization,

management

systems,

etc.),

leadership, committees and their quorum (Audit committee, governance

committee, etc.), role, term and liability of directors, remuneration of
nonexecutive directors.

Tata Steel won the Golden Peacock Award for

Corporate Governance in the year 2002, for the outstanding achievement

for

excellence

in

Corporate

Governance

and

Corporate

Social

Responsibility in the private sector category.

TCS was presented with the Golden Peacock National Training Award
(2000) in recognition of being the biggest state-of-the-art training centre
in Asia at Thiruvananthapuram. The award is instituted by the Institute of
Directors

to

encourage

training

leading

to

improved

business

performance.
Tata Powers Jojobera division was presented the Golden Peacock Award
for Environment Excellence for the year 2005 at a ceremony of the World
Congress on Environment Management (WCEM), in recognition of the
Jojobera divisions unstinting pursuit of environmental excellence.
plant is also certified to ISO 14001 and OHSAS 18001 standards.
Review of Annual Reports:

The

Ernst & Young in collaboration with the Confederation of Indian

Industry has published a handbook on Corporate Governance, to guide
companies

and

their

directors

regarding

Clause

49,

and

overall

implementation of corporate governance in the companies.

Corporate Governance Best Practices include the following :1. Structure & Composition of Board and Audit Committee - Board
to have adequate number of Independent Directors, at least
one-third,

induction

of

reputed

professionals

such

as

accountants and lawyers as independent directors, all nonexecutive

Board

members

to

rotate

through

the

Audit

Committee, etc.
2. Audit Committee Roles & Responsibilities - Audit Committee to
hold one-on-one sessions with the external auditors and internal
auditors at least once a year, Audit Committee to monitor and
guard against the risk of fraud and to also review all cases of
internal and external fraud related to the company, etc.
3. Internal Audit Internal audit to report directly to the Audit
Committee. Annual performance review of Internal Audit to be
conducted by Audit Committee, clear mission, role and scope for
the Internal Audit to be defined, etc.
4. Risk Management Board of Directors to be given adequate
exposure to / training on the company's business model and risk
profile, primary ownership for risks and timeliness for mitigation
to be defined clearly, etc
5. Legal compliance Company to draw up a comprehensive list of
all laws and regulations which it has to comply with in all
geographies in which it operates, Board to review compliance
status for at least key compliances at least once a year, etc.
6. Code of Ethics / Whistle Blower Policy Company to have a
documented Code of Ethics which is a public document and all
employees are made aware of this, Audit Committee to review

all complaints made via the Whistle blower Hotlines or email

IDs, etc.
7. Disclosures Company to have adequate processes to capture
the information required for various disclosures under the Listing
Agreement, the Companies Act, and other industry specific or
licensing-related regulations, etc
8. Internal Control Evaluation All accounting units and business
process that can materially impact financial reporting to be
identified, owners of each control to be identified, etc
In the light of the above mentioned points, five Tata Companies
were identified across sectors and their Annual Reports for the year 201516 were reviewed. The companies selected werea.Tata Motors (Engineering Sector)
b.Tata Tea (Consumer Products)
c. Tata Chemicals (Chemicals Sector)
d.The Indian Hotels Company Limited (Taj Group) (Services Sector)
e. Tata Consultancy Services Limited (Information Systems and
Communications)
It has been observed that all the Tata Companies not only try to adhere
strictly to the statutory compliances but at times tend to excel the
minimum statutory requirements.
Pursuant to SEBI Clause 49(I)(C)(ii), none of the Directors on the
Board of Tata Chemicals Limited, TCS, Taj Group, Tata Motors is a member
of more than 10 committees and chairman of more than 5 committees
across all companies in which he is a Director.

All the Directors have

made the requisite disclosures regarding committee positions held by

them in other companies.
Five out of the 11 Directors of Tata Chemicals Limited have attended
all the 8 Board meetings held during the financial year 2005-06 and other
directors have attended on an average 6 meetings.

During the year under review (2015-16), the Board of Directors of

The Indian Hotels Company Limited

met seven times and the period

between any two meetings did not exceed four months.

At Tata Tea Limited, there was no such instance of non-compliance by the
company, penalties, strictures imposed on the company by Stock
Exchange or SEBI or any statutory authority, on any matter related to
capital markets during the last three years.
The Indian Hotels Company Limited, Tata Tea Limited, TCS, Tata
Motors have adopted the Whistle Blower Policy, pursuant to which
employees can raise their concerns relating to fraud, malpractice or any
other activity or event which is against the Company's interest.

No

employee has been denied access to the Audit Committee in this regard.

Corporate Governance at Infosys

Brief introduction to Infosys
In 1981, seven software engineers started Infosys on a shoestring $1000
budget. One of the seven, ultimately the public face of the company, was
Narayan Murthy, a 1969 graduate of the Indian Institute of Technology,
Kanpur. The fledgling company immediately focused on the demands of
the international market, perceiving there to be insignificant domestic
opportunity. The company grew slowly through the 1980s, almost going
under in 1989. The early 1990s saw a confluence of two events - one

internal to Infosys and one external. Externally, a foreign exchange crisis

prompted the opening up of India to global competition and the scrapping
of the stifling regulatory regime that had come to be known as the 'license
raj.' Internally, the departure f a key founder prompted introspection at
Infosys as to the right way to capitalize on the new external opportunities.
The contours of the strategy that emerged were the following: shifting so
as to do software development within India as opposed to purely at
foreign clients' sites; a relentless focus on attracting and retaining talent;
and conservative financing. Subsequent growth at the company was
rapid. The company went public on the Bombay Stock Exchange in 1993,
and on NASDAQ in 1999. It became the employer-of choice not just in the
Indian software industry but in India more broadly, was identified as the
public face of India's globally competitive software industry and accepted
as Asia's leading information technology firm. Murthy, with his Spartan
self-image, became a revered public figure and spearheaded a general
drive towards professionalism throughout the Indian corporate sector.
Values
If there's one thing that defines the most successful companies, it's not
their bottom line - it's their values. At Infosys, the values we stand by
have made us who we are today. They've shaped our culture, our work
ethics, and our decisions; helping us push the envelope and be more than
what we were yesterday.
Client Value:
To surpass client expectations consistently.
Leadership by Example:
To set standards in our business and transactions, and to be an exemplar
for the industry and ourselves.
Integrity and Transparency:
To be ethical and sincere in all our transactions.

Corporate governance philosophy

"Good corporate governance is about maximizing shareholder value on a
sustainable basis while ensuring fairness to all stakeholders: customers,
vendor partners, investors, employees, government and society."
N. R. Narayana Murthy
Infosys is committed to defining, following and practicing the highest level
of corporate governance across all our business functions. Our corporate
governance is a reflection of our value system encompassing our culture,
policies, and relationships with our stakeholders. Integrity and
transparency are key to our corporate governance practices and
performance and ensure that we retain and gain the trust of our
stakeholders at all times.

Corporate governance at Infosys

A centre piece of the Infosys success story was the attention paid to
corporate governance. Infosys prided itself on several 'firsts' in the Indian
context, disclosing these in its annual reports (Kuemmerle and Coughlin,
2000). Interestingly, eight of the twelve such firsts had to do with
adopting corporate governance practices far beyond those mandated by
Indian
corporate governance standards. They are cognizant that the idea of
functional equivalence alluded to in our earlier literature review suggests
that this may not be the only set of meaningful dimensions of the form
which good corporate governance practices take. This critique, however,
would apply to any chosen set of dimensions. Financial reporting and
disclosure Infosys was the first Indian company to follow US
GAAP(Generally Accepted Accounting Principles), to value human
resources and voluntarily disclose such a valuation with the statement of
accounts, to value its brand and disclose this information with
the balance sheet, to distribute audited quarterly reports to all investors,
to guarantee publication of audited annual balance sheets very soon after
the close of the fiscal year (typically by April 15 for a March31 year-end),
to provide the audited balance sheet in soft copy format (floppy disks and
CD-ROM) to investors and to make the balance sheet available on the
internet. These reporting practices put Infosys at the leading edge of

Indian
practice in terms of financial reporting and disclosure.

Management compensation
Infosys was one of the first companies to offer stock options to all
qualified employees (Kuemmerle and Coughlin, 2000), not just to senior
management. The intention was to provide appropriate incentives for the
employees to create shareholder value, and to share a part of the value
created with the employees. Pay-for-performance was not adopted
widely in India at this time.14 In fact, Indian regulations prohibited
companies from distributing employee stock options. Infosys and the rest
of the software industry, therefore, broke new ground in this respect by
lobbying the government to change the regulations.

Board structure and practices

At the core of our corporate governance practice is the Infosys Board,
which oversees how the management serves and protects the long-term
interests of all our stakeholders. The majority of the board, seven out of
10, are independent members. As active and well informed members of
the board, they are fully committed to ensuring the highest standards of
corporate governance. In addition, the independent directors make up the
audit,

compensation,

investor

grievance,

nominations,

and

risk

management committees, bringing their valuable perspective to the

board.
As a part of our commitment to follow global best practices, we comply
with the Euro shareholders Corporate Governance Guidelines 2000, and
the recommendations of the Conference Board Commission on Public
Trusts and Private Enterprises in the US. We also adhere to the UN Global
Compact Program.

Infosys did not play as leading a role in ensuring a board that was
comprised of independent directors, but was quick to remedy this

deficiency soon after the adoption of other corporate governance

practices. Currently, the company's board consists of several outsiders,
including several international experts, and its practices for evaluating the
performance of board members are considered cutting edge. However,
the adoption of these various practices were symptoms of a more resilient
underlying attitude that is worth noting. Infosys developed an unusual
reputation for probity, honesty and transparency in all its dealings.
Interviews revealed several illustrative examples, three of which are
described briefly below (in chronological order):
(1) 'In 1984, when the company was working for Borland, it was importing
software from the US. At the time you had to pay customs duties on the
software (150%). Some companies
creatively interpreted the law. To get around it companies would sell books
(there was no
duty on books) and manuals with floppies. If you had software that was
worth $60, they
would say that the charge of the software was $10 but the book to go with
it was $50. So they were able to avoid the duty and achieve higher
margins. Infosys refused to do this, and said they would rather sell the
software at half price (lower margins) than try to circumvent
the law.'
(2) 'In 1992, Infosys gave a fixed price bid to a company. The fixed price
was based on
assumptions about the time and people it would take, etc. After a short
while on the
project Infosys realized it had vastly underestimated what the cost/time
requirement
would be. They had two choices: (1) to try to change the contract or (2) to
honor the
contract. The law would have permitted some room for Infosys to back
out, but they
didn't. They put more people on the project and honored the contract.
'Corporate governance is about honoring your commitments; to your

customers, your employees, your

investors.'
(3) 'Infosys collected a lot of money through its public offering in the early
1990s. It was
waiting for the government to give it clearance to invest that money in a
subsidiary in the US. While it was waiting, several board members
suggested that the money, instead of
sitting in the bank, should be invested in Indian stocks. Infosys lost quite a
bit of money
in the ensuing transaction. Then there was the question of what you tell
people about what
happened. Most Indian companies would not have disclosed this, and
Indian law would not
require such disclosure either. But Infosys decided to disclose the losses.
The board was
ready to face the wrath of the investors, and they figured they would be
kicked out and
replaced. But when the meeting came, the investors said 'we respect what
you have done.
Because you have disclosed something when you are in trouble, we can
trust you.' The real
indicator of good corporate governance is how you respond in difficult
times.'
Why did Infosys adopt good corporate governance measures?
Analytically this question can be answered in two parts. First, what factors
explain Infosys' adoption of good measures, and, perhaps equally
importantly, why did (most) other software firms not adopt similar
measures?

Lack of capital market pressure

Infosys executives and others in India are quick to dismiss the idea that
the corporate governance practices at Infosys were adopted to attract

capital. Thus, Jayanth Verma, a

member of the Securities and Exchange Board of India, stated, The
industry that probably needs capital the least, went after the international
capital markets most aggressively....
In fact many of these companies don't know what to do with the capital
they raised... . The pressures that the capital market scan put on a
company that doesn't need to raise capital are next to nothing. In this
regard, it is also worth noting that many of the practices for which Infosys
is lauded were adopted by the company far in advance of its NASDAQ
listing and, indeed, in advance of its listing on the Bombay Stock
Exchange in 1993.
Further, a high reliance on internally generated capital, and strict
adherence to a zero debt policy, suggests that the stringent governance
standards are unlikely to have been adopted purely to assuage the
concerns of external capital providers. That Infofys was relatively less in
need of capital is borne out by an analysis of sources and uses of funds.
Specifically, the line items 'Cash from operations' and 'Cash used in
investing activities' for Infosys and 166 other Indian software companies
using data collected by the Center for Monitoring the Indian Economy
(Mumbai). These data for Infosys were available for each of six years
(1995-2000) and were available for the other firms for varying numbers of
years (ranging from 1 to 6 years). They used a 'difference measure' -'Cash
used in investing activities' - 'Cash from operations' as our crude
measure of need for capital. Infosys had the third least need for capital
out of 91 firms for which data were available in 2000, second least out
of 89 firms in 1999, second least out of 63 firms in 1998, sixth least out of
54 firms in 1997 and second least out of 46 firms in 1996. Further, when
comparison of the difference measure between Infosys and other software
firms was restricted to those 14 firms for which we had a reasonable time
series (6 years), Infosys was the second least capital
constrained of this set.
In contrast, the primary reason cited for adoption of the corporate
governance measures is to gain credibility with customers in the rough-

and-tumble of the software product market. This is especially so for a

company originating in a country with a baggage of negative corporate
governance. Equally important is the need to be transparent and
forthcoming with talent that has truly global options. Infosys remains an
employer of choice on the
campuses of the leading Indian engineering and management schools
today.17 Of course, these reasons are inter-related. The talent is needed
in order to be able to successfully compete in the product market. To shed
some further light on the kinds of factors
that might have caused Infosys to adopt good corporate governance.
Unsurprisingly, all
conform to certain minimal standards required of companies listed on US
exchanges, such as a reconciliation of the Indian GAAP accounting
statements with US GAAP. However, there is quite a bit of variation in the
extent to which other information is provided.
The evolution of a set of corporate governance practices at Infosys,
gleaned entirely
from its annual reports. In every year from 1994 to 2001 more information
relevant to corporate governance is released (with the exception of the
transition from 1999 to 2000 during which time there is no change).

Conclusion
To quote Ratan Tata on Corporate Governance,
The role of the board should be that of governance to ensure that
corporate direction and management are executed in the best interest of
the shareholders, to ensure that shareholder value is not eroded and that
the corporation fully recognized and bears its social responsibility. To be
effective, the board needs to focus on:
Strategic direction and implementation
Monitoring financial performance
CEO development
Evaluation and succession

 Monitoring legal and ethical performance

Long before Corporate Governance became a buzzword in industry
circles, Tata Steel was following the letter and spirit of the rules that
define ethical business behaviour. Union Ministry of Finance awarded the
company the National Award for Excellence in Corporate Governance in
2000.
Corporate governance is now the focus area of all business
entities. Tatas are a stalwart and the exemplary performance of Tata
Group in the field of corporate governance, with strong code of ethics and
excellence in performance is worth being appreciated. It is rightly said
about Tatas 'Good governance has taken root in and spread to all
branches of the Tata Group and there is nothing amorphous about that.'
Tatas have already set high standards for corporate governance which
shall be revered, appreciated and followed by the generations to come.
When it comes to software firms', and especially Infosys', exposure to
global product markets, first, and then to global talent markets, seems to
have driven some adoption of shareholder-style corporate governance in
India. If anything, Infosys and some other Indian software firms
accessed global capital markets long after their exposure to global
product

and

global

talent

markets had driven them to adopt good corporate governance practices.

Infosys may have chosen to be a lead adopter of such practices in India
for several reasons that - as a signal of its high quality, to benefit
indirectly from positive externalities that its adoption decision had on
other software firms in India, or as a consequence of Infosys' CEO's
ideological bent.

References
- https://www.infosys.com/investors/reports-filings/annualreport/annual/Documents/infosys-AR-16.pdf
- http://www.tata.com/aboutus/sub_index/Governance
- Globalization and convergence in corporate governance:
evidence from Infosys and the Indian software industry
By Krishna G Palepu and Tarun Khanna