Thursday, January 14, 2016

Infosys - Indpendent director - close relatives of ministers and politicians

The news that Infosys has appointed Ms. Punita Sinha wife of Union minister Mr. Jayant Sinha has raised the debate whether a company should appoint the close relative of a minister or politician, who meets the fit and proper criteria, as an independent director in the board.

Independent directors prime responsibility is to protect the interest of the company by closely monitoring the management. The resource dependancy theory suggests that independent directors brong variey of resources, particularly through net working and thus, create value for the company. Therefore, companies prefer to appont highly net-worked individuals as independent director. There is nothing wrong in it.

On the face of it there is nothing wrong in Infosys appointing Ms. Punita Singh as an independent director on the board. However, keeping in view the culture of crony-capitalisms and politicians using their clouts in the government to benefit companies, the allegation of nepotism cannot be wished away. Therefore, it is better to avoid appointment of close relatives of ministers and politicians as independent director. While saying so, I must mention that in an environment of crony-capitalism there are many ways to appease ministers and politicians without drawing the public attention.

I do not see reasons for paying too much attention to the appointment of Ms. Punita Singh as independent director of Infosys.

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