India's second largest IT software services company Infosys is being questioned for re-appointing an independent director (Prof Jeffrey Lehman) for a third term, going against the spirit of corporate governance norms.
The Bengaluru-based IT software services company proposed the appointment of Prof Jeffrey Lehman as independent director for a two-year term last month. Lehman has already served on the company's board for nine years.
This is being seen as going against the spirit of corporate governance norms as stipulated in the Companies Act 2013 that restricts the tenure of independent directors at 10 years. The Companies Act 2013 begins counting a director's tenure from when the Act came into force (April 1, 2014).
The proposed Infosys resolution had prompted proxy advisory firm Institutional Investor Advisory Services (IiAS) to advise shareholders to vote against the resolution seeking to reappoint Lehman for a third term that would have extended his total tenure in the company beyond 10 years.
Infosys justified its decision saying the reappointment was "in compliance with the requirements of the Companies Act and SEBI regulations," in a filing to the BSE March 22.
IiAS responded by saying Lehman's long tenure on Infosys board removes the "independent" tag from his designation.
"Our contention was that the Prof Lehman's tenure on the board will cross 10 years in April 2016, and therefore, he must not be categorised as an independent director," it said.
IiAS quoted a relevant provision of the Act in support of its argument." The Companies Act 2013 has set independent directors' tenure at a maximum of 10 years (2 consecutive terms of 5 years each)."
Infosys -- co-founded by N R Narayana Murthy, Nandan Nilakeni, Kris Gopalakrishnan, S D Shibulal, N S Raghavan, K Dinesh and Ashok Arora -- is seeking to appoint Lehman for a short tenure of two years and the company said he "brings to the Board unique and invaluable inputs bridging between past and current perspectives."
Infosys has recently recommended extending MD & CEO Vishal Sikka's tenure till March 2021.