CORPORATE GOVERNANCE REPORT
Our 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
We are committed to defining, following and practising 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 framework
This framework ensures effective engagement with our stakeholders and helps us to be guided by our core values, and at the same time allows us to do more and be more for our stakeholders. Our corporate governance framework ensures that we make timely disclosures and share accurate information regarding our financials and performance, as well as disclosures related to the leadership and governance of Infosys (‘the Company’). We believe that an active, well-informed and independent board is necessary to ensure the highest standards of corporate governance. At Infosys, the Board of Directors (‘the Board’) is at the core of our corporate governance practice. The Board thus oversees the Management’s functions and protects the long-term interests of our stakeholders. As on March 31, 2016, the Board consists of nine members of which seven are independent directors.
An independent director is nominated as the chairperson of each of the Board committees, namely audit, nomination and remuneration, stakeholder relationship, risk and strategy, finance and investment and corporate social responsibility committees.
Compliance with global guidelines and standards
We comply with a broad selection of key governance principles and regulations. For example, the Cadbury Report in the U.K. in 1992 was a significant event in modern corporate governance.
The report recommended the arrangement of company boards and accounting systems to reduce corporate governance risks and failures. The enactment of the Sarbanes-Oxley Act, 2002, resulted in the senior management individually certifying the accuracy of their company’s financial information. The Dodd-Frank Wall Street Reform and Consumer Protection Act sought to build a safer, more stable financial system to set the foundation for sound economic growth and job safety.
The Securities and Exchange Board of India (SEBI) has notified SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) on September 2, 2015, replacing the earlier listing agreement (w.e.f. December 1, 2015) and is aimed to consolidate and streamline the provisions of earlier listing agreements for different segments of the capital market viz. equity, debentures, debt instruments, etc.
The LODR regulations have incorporated the principles for corporate governance in line with the Organisation for Economic Co-operation and Development (OECD) principles and provide broad principles for periodic disclosures by listed entities in line with the International Organization of Securities Commissions (IOSCO) principles. As part of our commitment to follow global best practices, we substantially comply with the Euroshareholders Corporate Governance Guidelines 2000 and the recommendations of the Conference Board Commission on Public Trusts and Private Enterprises in the U.S. We also adhere to the United Nations Global Compact (UNGC) and the OECD principles.
Corporate governance guidelines
Over the years, the Board has developed corporate governance guidelines to help fulfill our corporate responsibility towards our stakeholders. These guidelines ensure that the Board will have the necessary authority and processes to review and evaluate our operations when required. Further, these guidelines allow the Board to make decisions that are independent of the Management. The Board may change these guidelines regularly to achieve our stated objectives.
A. Board composition
Size and composition of the Board
We believe that our Board needs to have an appropriate mix of executive and independent directors to maintain its independence, and separate its functions of governance and management. Listing regulations mandate that for a company with a non-executive chairman, at least one-third of the board should be independent directors. On March 31, 2016, our Board consists of nine members, two of whom are executive or whole-time directors, while the remaining seven are independent directors, constituting 78% of the Board’s strength — more than the requirements of the Companies Act, 2013 and the SEBI Listing Regulations.
Three out of nine Board members or 33% of the Board are women. Five of our Board members (56%) are Indians, while four (44%) are foreign nationals. The Board periodically evaluates the need for change in its composition and size.
The average tenure of members on our Board is approximately 3.2 years as of March 31, 2016. The average tenure of executive directors (whole-time directors) is two years and that of independent directors is 3.6 years. In February 2016, the Board, after evaluating, proposed the re-appointment of Prof. Jeffrey S. Lehman because his continued service was deemed necessary considering the Company’s transition to new leadership. The Board felt that Prof. Lehman’s tenure complements the tenures of the other Board members, and as a director who has seen the Company under the management of promoters and non-promoters, he bridges the gap between the past and current perspectives.
The average tenure of Board members as on March 31, 2016 was as follows Chairman of the Board
K. V. Kamath stepped down as Chairman and Independent Director of the Company effective June 5, 2015 consequent to his appointment as the President of the New Development Bank promoted by BRICS nations. R. Seshasayee, an independent director, took over as the Chairman of the Board effective June 5, 2015.
Responsibilities of the Chairman, the Chief Executive Officer and Managing Director
The Company has appointed a non-executive chairman of the Board (‘the Chairman’) – R. Seshasayee and a chief executive officer and managing director (the CEO and MD) – Dr. Vishal Sikka.
The responsibilities and authority of these officials are as follows :
The Chairman is the leader of the Board. As Chairman, he is responsible for fostering and promoting the integrity of the Board while nurturing a culture where the Board works harmoniously for the long-term benefit of the Company and all its stakeholders. The Chairman is primarily responsible for ensuring that the Board provides effective governance to the Company. In doing so, the Chairman presides over meetings of the Board and of the shareholders of the Company.
The Chairman takes a lead role in managing the Board and facilitating effective communication among directors. He is responsible for matters pertaining to governance, including the organization, composition and effectiveness of the Board and its committees, and the performance of individual directors in fulfilling their responsibilities. The Chairman provides independent leadership to the Board, identifies guidelines for the conduct and performance of directors, and oversees the management of the Board’s administrative activities such as meetings, schedules, agendas, communication and documentation.
The Chairman actively works with the nomination and remuneration committee to plan the Board and Board committees’ composition, induct directors to the Board, plan for director succession, participate in the Board effectiveness evaluation process and meet with individual directors to provide constructive feedback and advice.
The CEO and MD is responsible for corporate strategy, brand equity, planning, external contacts and all matters related to the management of the Company. He is also responsible for achieving annual and long-term business targets.
Role of the Board of Directors
The primary role of the Board is that of trusteeship to protect and enhance shareholder value through strategic direction to the Company. As trustees, the Board has fiduciary responsibility to ensure that the Company has clear goals aligned to shareholder value and its growth. The Board exercises its duties with care, skill and diligence and exercises independent judgment. The Board sets strategic goals and seeks accountability for their fulfillment. The Board also directs and exercises appropriate control to ensure that the Company is managed in a manner that fulfills stakeholders’ aspirations and societal expectations.
Definition of independent directors
The Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 defines an ‘independent director’ as a person who is not a promoter or employee or one of the key managerial personnel of the Company or its subsidiaries. The laws also state that the person should not have a material pecuniary relationship or transactions with the Company or its subsidiaries, apart from receiving remuneration as an independent director.
We abide by these definitions of independent director in addition to the definitions of an independent director as laid down in the New York Stock Exchange (NYSE) rules and U.S. securities laws by virtue of our listing on the NYSE in the U.S.
Board membership criteria
The nomination and remuneration committee works with the entire Board to determine the appropriate characteristics, skills and experience required for the Board as a whole and for individual members. Members are expected to possess the required qualifications, integrity, expertise and experience for the position. They should also possess deep expertise and insights in sectors / areas relevant to the Company, and ability to contribute to the Company’s growth.
The age limit for a managing director / executive director is 60 years while the age limit for an independent director is 70 years. A director’s term may be extended at the discretion of the committee beyond the age of 60 or 70 years with shareholder approval by passing a special resolution based on the explanatory statement annexed to the Notice for such motion indicating the justification for extension of appointment beyond 60 or 70 years as the case may be.
The Board members are expected to rigorously prepare for, attend and participate in all Board and applicable committee meetings. Each member is expected to ensure that their other current and planned future commitments do not materially interfere with their responsibilities with us.
Selection of new directors
The Board is responsible for the selection of new directors. The Board delegates the screening and selection process to the nomination and remuneration committee, which consists exclusively of independent directors. The nomination and remuneration committee makes recommendations to the Board on the induction of new directors.
Training of Board members
All new non-executive directors inducted to the Board are introduced to our Company culture through orientation sessions. Current executive directors and senior management provide an overview of our operations, and familiarize the new non-executive directors with them. They are also introduced to our organization structure, our services, group structure and subsidiaries, constitution, Board procedures, matters reserved for the Board, and our major risks and risk management strategy.
The Board’s policy is to have separate meetings regularly with independent directors to update them on all business-related issues and new initiatives. At such meetings, the executive directors and other members of the senior management share points of view and leadership thoughts on relevant issues.
We also facilitate the continual educational requirements of our directors. Each director is entitled to a training fee of US $5,000 per year. Support is provided for independent directors if they choose to attend educational programs in the areas of Board / corporate governance. Independent directors of the Board are familiarized through three
kinds of engagements :
Deep dives and immersion sessions
Deep dives and immersion sessions are conducted by senior executives on their respective business units. The business unit can be an industry vertical or a service offering unit. Key aspects that are covered in these sessions include :
• Industry / market and technology trends
• The Company’s performance
• Strategic bets and their progress
• Future outlook
A strategy retreat is conducted for all the Board members every year and includes participation by senior business executives. This session helps Board members familiarize themselves with the strategy and business of the Company.
Our annual strategy and planning event, STRAP, is usually a two-day event. Along with the Board members, almost all senior executives from business and support functions are invited to this event. At STRAP, a detailed view of the strategy is presented by all business and support units. The objective of STRAP is to communicate the strategy and make the organization aware about it.
These are the three specific mechanisms through which Board members are familiarized with the Company culture and operations. Apart from these, there could be additional meetings or sessions on demand on specific topics. All directors attend the familiarization programs as these are scheduled to coincide with the Board meeting calendar to give them an opportunity to attend.
The Board constantly evaluates the contribution of the members and periodically shares updates with the shareholders about re-appointments consistent with applicable statutes. The current law in India mandates the retirement of two-third of the non-independent directors (who are liable to retire by rotation) every year, and qualifies the retiring members for re-appointment. Executive directors are appointed by the shareholders for a maximum period of five years, but are eligible for re-appointment upon completion of their term.
An independent director shall hold office for a term of up to five consecutive years on the Board of the Company and will be eligible for re-appointment on the passing of a special resolution by the Company.
Board member evaluation
One of the key functions of the Board is to monitor and review the Board evaluation framework. The Board works with the nomination and remuneration committee to lay down the evaluation criteria for the performance of executive / non-executive / independent directors through a peer evaluation, excluding the director being evaluated through a Board effectiveness survey. The questionnaire of the survey is a key part of the process of reviewing the functioning and effectiveness of the Board and for identifying possible paths for improvement. Each Board member is requested to evaluate the effectiveness of the Board dynamics and relationships, information flow, decision-making of the directors, relationship with stakeholders, Company performance and strategy, and the effectiveness of the whole Board and its various committees. Feedback on each director is encouraged to be provided as part of the survey. The evaluation for fiscal 2016 has been completed.
Independent directors have three key roles – governance, control and guidance. Some of the performance indicators based on which the independent directors are evaluated include :
• The ability to contribute to and monitor our corporate governance practices
• The ability to contribute by introducing international best practices to address business challenges and risks
• Active participation in long-term strategic planning
• Commitment to the fulfillment of a director’s obligations and fiduciary responsibilities; these include participation in Board and committee meetings.
The nomination and remuneration committee works with the Board on the leadership succession plan, and prepares contingency plans for succession in case of any exigencies.
Board compensation policy
The nomination and remuneration committee determines and recommends to the Board the compensation payable to directors. All Board-level compensation is approved by the shareholders and disclosed separately in the financial statements. Remuneration for the executive directors consists of a fixed component and a variable component. The committee makes a half-yearly appraisal of the performance of the executive directors based on a detailed performance matrix. The annual compensation of the executive directors is approved by the committee and placed before the shareholders at the shareholders’ meeting / postal ballot.
The CEO and MD of the Company is entitled to an annual variable, which is subject to the achievement of certain fiscal milestones by the Company, as determined by the Board (in its sole discretion). The Board may reserve the authority to set such milestones on a GAAP or non-GAAP basis. The Chief Operating Officer of the Company is entitled to receive payables at such intervals as decided by the Board.
The compensation payable to the independent directors is limited to a fixed amount per year as determined and approved by the Board, the sum of which does not exceed 1% of our net profits for the year, calculated as per the provisions of the Companies Act, 2013. The performance of the independent directors is reviewed by the Board on an annual basis
Service contracts, notice period, severance fees
We have entered into agreements with our executive directors, Dr. Vishal Sikka, the CEO and MD, and U. B. Pravin Rao, our COO. Dr. Vishal Sikka’s executive employment agreement was replaced with a new executive employment agreement, through postal ballot approved by the shareholders on March 31, 2016. This agreement was effective April 1, 2016 and expires on March 31, 2021. The Board and its nomination and remuneration committee have approved the following compensation :
• Base pay : An annual base salary of US $1,000,000 to be paid in accordance with the Company’s normal practices and subject to withholding taxes;
• Variable pay : Annual performance-based variable pay at a target level of US $3,000,000 less applicable tax and subject to the Company’s achievement of fiscal year performance targets set by the Board as described in the postal ballot;
• Stock compensation : Eligible to receive an annual grant of 1) US $2,000,000 of fair value in RSUs which vest over time (‘time-based RSUs’), subject to continued service, and 2) US $5,000,000 in performance-based equity and stock options upon achievement of certain performance targets as described in the postal ballot;
• Employee benefits and paid vacation as applicable to other whole-time directors of the Company;
• Minimum and maximum remuneration : Should Dr. Sikka fail to achieve minimum performance targets, his remuneration as proposed will fall to US $3,000,000 annually, consisting of US $1,000,000 of base salary and US $2,000,000 of time-based RSUs. If Dr. Sikka’s performance targets are exceeded, the performance-based payments for variable components of his compensation (variable pay and performance equity) will be capped at 150% of the target compensation for such variable components. We have agreed with Dr. Sikka to provide each other with 90 days’ notice of termination as applicable. Dr. Sikka may be entitled to severance benefits depending on the circumstances of his termination of employment.
During fiscal 2015, we entered into a restricted stock unit award agreement with Dr. Vishal Sikka, our CEO and MD. Pursuant to the Restricted Stock Unit Award Agreement, Dr. Sikka was granted 27,067 restricted stock units (the equivalent of 1,08,268 RSUs after adjustment for the bonus issues). The RSUs vest over a period of four years subject to Dr. Sikka’s continued employment and upon achieving certain performance indicators set by the Board or the nomination and remuneration committee from time to time. The Board in its meeting held on June 22, 2015, on recommendation of the nomination and remuneration committee, further granted 1,24,061 RSUs to Dr. Vishal Sikka. These RSUs are vesting over a period of four years from the date of the grant in the proportions specified in the award agreement. The RSUs will vest subject to the achievement of certain key performance indicators as set forth in the award agreement for each applicable year of the vesting tranche and continued employment through each vesting date.
The award granted to Dr. Vishal Sikka on June 22, 2015 was modified by the nomination and remuneration committee on April 14, 2016. There is no modification or change in the total number of RSUs granted or the vesting period (which is four years). The modifications relate to the criteria of vesting for each of the years. Based on the modification, the first tranche of the RSUs will vest subject to achievement of certain key performance indicators for the year ended March 31, 2016. Subsequent vesting of RSUs for each of the remaining years would be subject to continued employment. None of our directors except Dr. Vishal Sikka is eligible for any severance pay.
Pravin Rao’s employment agreement provides for a monthly salary, bonuses, and benefits including vacation, medical reimbursements and gratuity contributions. The agreement with him has a five-year term and either party may terminate the agreement with six months’ notice or as mutually agreed between the parties. There are no benefits payable upon termination of this agreement.
We have also entered into agreements to indemnify our directors and officers for claims brought under U.S. laws to the fullest extent permitted by Indian law. These agreements, among other things, indemnify our directors and officers for certain expenses, judgments, fines and settlement amounts incurred by any such person in any action or proceeding, including any action by or in the right of Infosys Limited, arising out of such persons’ services as our director or officer. Non-executive / independent directors’ remuneration Shareholders at the 34th Annual General Meeting held on June 22, 2015 approved a sum not exceeding 1% per annum of the net profits of the Company calculated in accordance with the provisions of Section 198 of the Act, to be paid and distributed among some or all of the directors of the Company (other than the managing director and whole-time directors) in a manner decided by the Board of Directors and this payment will be made with respect to the profits of the Company for each year.
The Board believes that the above compensation structure is commensurate with global best practices in terms of remunerating non-executive / independent directors of a company of similar size, and adequately compensates for the time and contribution made by our non-executive / independent directors.
Memberships in other boards
An executive director may, with the prior consent of the chairman of the Board, serve on the board of two other business entities, provided that such business entities are not in direct competition with our operations. Executive directors are also allowed to serve on the boards of corporate or government bodies whose interests are germane to the future of the IT and software business or the key economic institutions of the nation, or whose prime objective is to benefit society. Independent directors are not expected to serve on the boards of competing companies. There are no other limitations except those imposed by law and good corporate governance practices.
B. Board meetings
Scheduling and selection of agenda items for Board meetings The dates of Board meetings for the next fiscal are decided in advance and published in the Annual Report as part of Shareholder information.
The non-executive chairman of the Board and the Company Secretary draft the agenda for each meeting, along with explanatory notes, in consultation with the CEO and MD, and distribute these in advance to the directors. Every Board member can suggest the inclusion of additional items in the agenda. The Board meets at least once a quarter to review the quarterly results and other items on the agenda, and also on the occasion of the AGM. Additional meetings are held when necessary. Independent directors are expected to attend at least four Board meetings in a year. However, with the Board being represented by independent directors from various parts of the world, it may not be possible for each one of them to be physically present at all the meetings. Hence, we use video / teleconferencing facilities to enable their participation. Committees of the Board usually meet the day before the formal Board meeting, or whenever the need arises for transacting business. Eight Board meetings were held during the year ended March 31, 2016. These were held on April 24, 2015, June 5, 2015, June 22, 2015, July 21, 2015, October 12, 2015, October 19, 2015, January 14, 2016 and February 24, 2016.
Availability of information to Board members
The Board has unrestricted access to all Company-related information, including that of our employees. At Board meetings, managers and representatives who can provide additional insights into the items being discussed are invited. Regular updates provided to the Board include :
• Annual operating plans and budgets, capital budgets and updates
• Quarterly results of our operating divisions or business segments
• Minutes of meetings of audit, nomination and remuneration, risk and strategy, stakeholders relationship, finance and investment, and corporate social responsibility committees, and abstracts of circular resolutions passed
• The Board meeting minutes of the subsidiaries
• General notices of interest received from directors
• Dividend data
• Information on recruitment and remuneration of senior officers below the Board level, including appointment or removal of the Chief Financial Officer and Company Secretary, if any
• Materially important litigations, show cause, demand, prosecution and penalty notices
• Fatal or serious accidents, dangerous occurrences, and issues related to material effluents or pollution
• Any materially relevant defaults in financial obligations to and by us
• Any issue that involves possible public or product liability claims of a substantial nature
• Details of joint ventures, acquisitions of companies, or collaboration agreements
• Transactions that involve substantial payments toward goodwill, brand equity or Intellectual Property (IP)
• Any significant development involving human resource management
• Sale of a material nature, or of investments, subsidiaries and assets, which are not part of the normal course of business
• Details of foreign exchange exposure and the steps taken by the Management to limit risks of adverse exchange rate movement
• Non-compliance with any regulatory, statutory or listing requirements, as well as shareholder services, such as non-payment of dividend and delays in share transfer
• Quarterly compliance reports and investor grievance reports
• Discussion with independent directors
Independent directors meeting
Schedule IV of the Companies Act, 2013 and the Rules under it mandate that the independent directors of the Company hold at least one meeting in a year, without the attendance of non-independent directors and members of the Management. It is recommended that all the independent directors of the Company be present at such meetings. These meetings are expected to review the performance of the non-independent directors and the Board as a whole, as well as the performance of the chairman of the Board, taking into account the views of the executive directors and non-executive directors; assess the quality, quantity and timeliness of the flow of information between the Management and the Board that is necessary for it to effectively and reasonably perform its duties.
Even before the Companies Act, 2013 came into effect, our Board’s policy required our independent directors to hold quarterly meetings attended exclusively by the independent directors. At such meetings, the independent directors discuss, among other matters, the performance of the Company and risks faced by it, the flow of information to the Board, competition, strategy, leadership strengths and weaknesses, governance, compliance, Board movements, human resource matters and performance of the executive members of the Board, including the Chairman.
Materially significant related party transactions
There have been no materially significant related party transactions, monetary transactions or relationships between the Company and its directors, the Management, subsidiaries or relatives, except for those disclosed in the Board’s report. Detailed information on materially significant related party transactions is enclosed as Annexure 2 to the Board’s report.
C. Board committees
Currently, the Board has six committees : audit committee, corporate social responsibility (CSR) committee, nomination and remuneration committee, risk and strategy committee, stakeholders relationship committee, and finance and investment committee. All committees except the CSR committee consist entirely of independent directors
The Board, in consultation with the nomination and remuneration committee, is responsible for assigning and fixing terms of service for committee members. It delegates these powers to the nomination and remuneration committee.
The non-executive chairman 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 total number of members of the committee, whichever is higher.
1. Audit committee
Our audit committee comprised four independent directors as on March 31, 2016 :
• Roopa Kudva, Chairperson and Financial Expert
• Prof. Jeffrey S. Lehman
• R. Seshasayee
• Ravi Venkatesan
Roopa Kudva was appointed as a member of the audit committee effective April 24, 2015 and on July 21, 2015 she took over as the chairperson from R. Seshasayee.
K. V. Kamath ceased to be a member of the audit committee effective June 5, 2015.
The Company Secretary acts as the secretary to the audit committee. The primary objective of the audit committee is to monitor and provide an effective supervision of the Management’s financial reporting process, to ensure accurate and timely disclosures, with the highest levels of transparency, integrity and quality of financial reporting. The audit committee oversees the work carried out in the financial reporting process by the Management, the internal auditors and the independent auditors, and notes the processes and safeguards employed by each of them. The audit committee has the ultimate authority and responsibility to select, evaluate and, where appropriate, replace the independent auditors in accordance with the law. All possible measures must be taken by the audit committee to ensure the objectivity and independence of the independent auditors. In India, we are listed on the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). We are also listed on the New York Stock Exchange (NYSE), Euronext Paris, and the Euronext London stock exchanges. In India, Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and in the U.S., the Blue Ribbon Committee set up by the U.S. Securities and Exchange Commission (SEC) mandate that listed companies adopt an appropriate audit committee charter. This recommendation has also been adopted by the NYSE.
All recommendations made by the audit committee during the year were accepted by the Board. The audit committee charter containing exhaustive terms of reference is available on our website (https://www. infosys.com/investors/corporate-governance/Documents/audit-committeecharter. pdf).
Audit committee report for the year ended March 31, 2016 Each member of the committee is an independent director, according to the definition laid down in the audit committee charter, Section 149 of the Companies Act, 2013 and Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, and NYSE requirements.
The Management is responsible for the Company’s internal control over financial reporting and the financial reporting process. The independent auditors are responsible for performing an independent audit of the Company’s financial statements in accordance with the Generally Accepted Auditing Principles, and for issuing a report thereon. The committee’s responsibility is to monitor these processes. The committee is also responsible for overseeing the processes related to financial reporting and information dissemination. This is to ensure that the financial statements are true, fair, sufficient and credible. In addition, the committee recommends to the Board the remuneration, appointment and terms of appointment of the Company’s internal and independent auditors.
In this context, the committee discussed the overall scope and plans for the independent audit with the Company’s auditors. The Management shared the Company’s financial statements prepared in accordance with the Indian GAAP and International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board with the committee. The committee discussed with the auditors, in the absence of the Management (whenever necessary), regarding the Company’s audited financial statements, including the auditors’ judgment about the quality, not just the applicability, of the accounting principles, the reasonableness of significant judgment and the clarity of disclosures in the financial statements.
The committee also discussed other matters required by the Statement on Auditing Standards No. 114, as amended (AICPA, Professional Standards, Volume 1. AU Section 380) – the auditors’ communication with those charged with governance, and by the Sarbanes-Oxley Act 2002, with the auditors.
Relying on the review and discussions conducted with the Management and the independent auditors, the committee believes that the Company’s financial statements are fairly presented in conformity with Indian GAAP and IFRS.
The committee has also reviewed the internal control over financial reporting put in place to ensure that the accounts of the Company are properly maintained and that the accounting transactions are in accordance with prevailing laws and regulations. In conducting such reviews, the committee found no material discrepancy or weakness in the Company’s internal control over financial reporting.
The committee also reviewed the financial policies of the Company and expressed its satisfaction with the same.
The Company’s auditors provided written disclosures and a letter for applicable requirements of the Public Company Accounting Oversight Board to the committee. This is regarding the auditors’ communication with the committee concerning independence, based on which the committee discussed the auditors’ independence with both the Management and the auditors. After the review, the committee expressed its satisfaction on the independence of both the internal and the independent auditors. The committee also considered whether any non-audit services provided by the independent audit firm could impair such auditors’ independence, and concluded that there were no such services provided.
The committee has confirmed compliance of the Board to the NYSE and Euronext London and Euronext Paris exchange rules on composition of the committee and independence of the committee members, disclosures relating to non-independent members, financial literacy and financial expertise of members, and a review of the audit committee charter.
Based on the committee’s discussion with the Management and the auditors, its review of the representations of the Management and the report of the auditors, the committee has recommended the following to the Board :
• The audited financial statements prepared in accordance with Indian GAAP of Infosys Limited for the year ended March 31, 2016 be accepted by the Board as a true and fair statement of the financial status of the Company.
• The audited consolidated financial statements prepared in accordance with Indian GAAP of Infosys Limited and its subsidiaries for the year ended March 31, 2016, be accepted by the Board as a true and fair statement of the financial status of the Group.
• The audited consolidated financial statements prepared in Indian rupee in accordance with IFRS of Infosys Limited and its subsidiaries for the year ended March 31, 2016, be accepted by the Board as a true and fair statement of the financial status of the Group.
• The audited consolidated financial statements prepared in US dollar in accordance with IFRS of Infosys Limited and its subsidiaries for the year ended March 31, 2016, upon adoption by this committee, be accepted by the Board as a true and fair statement of the financial status of the Group and included in the Company’s Annual Report on Form 20-F, to be filed with the Securities and Exchange Commission (SEC).
• The ratification of the re-appointment of B S R & Co. LLP, Chartered Accountants, as the statutory auditors of the Company, to audit standalone (Indian GAAP) financial statements and consolidated (Indian GAAP and IFRS) financial statements to hold office from the conclusion of the ensuing AGM to the conclusion of the next AGM. The committee has also recommended to the Board the appointment of KPMG, India, as independent auditors of the Company for the IFRS (US$) financial statements, for the fiscal ending March 31, 2017.
• The appointment of Ernst & Young, as the internal auditors of the Company for the fiscal ending March 31, 2017, to review various operations of the Company, and determination and approval of the fee payable to them. The committee has also issued a letter in line with recommendation No. 9 of the Blue Ribbon Committee on audit committee effectiveness, which is to be provided in the financial statements prepared in accordance with IFRS in the Annual Report on Form 20-F.
• The appointment of Parameshwar G. Hegde of Hegde & Hegde, Company Secretaries, as secretarial auditor for the fiscal year ending March 31, 2017 to conduct the secretarial audit as prescribed under Section 204 and other applicable sections of the Companies Act, 2013.
The Company has established a mechanism for directors and employees to report concerns about unethical behavior, actual or suspected fraud, or violation of our Code of Conduct and Ethics.
It also provides for adequate safeguards against the victimization of employees who avail of the mechanism, and allows direct access to the chairperson of the audit committee in exceptional cases. We further affirm that no director or employee has been denied access to the audit committee during fiscal 2016. The Whistleblower Policy is available on our website (http://www.infosys.com/investors/corporate-governance/ Pages/policies.aspx).
In conclusion, the committee is sufficiently satisfied that it has complied with its responsibilities as outlined in the audit committee charter. The charter is available on our website (https://www.infosys.com/ investors/corporate-governance/Documents/audit-committee-charter.pdf).
2. Corporate social responsibility (CSR) committee
Our CSR committee comprised two independent directors and the
CEO and MD as members as on March 31, 2016 :
• R. Seshasayee, Chairperson
• Kiran Mazumdar-Shaw
• Dr. Vishal Sikka
Carol M. Browner was appointed a member of the CSR committee effective April 24, 2015 and ceased to be a member effective November 23, 2015.
K. V. Kamath ceased to be a member of the CSR committee effective June 5, 2015.
While aiming to generate maximum profit for our shareholders through the year, we also keep a steadfast eye on our social and environmental responsibilities, to fulfill the needs and expectations of the larger society that we are part of. Our CSR is not limited to philanthropy, but encompasses holistic community development, institution-building and sustainability-related initiatives.
The CSR committee was set up to formulate and monitor the CSR policy of the Company. The CSR committee adopted a policy that intends to strive for economic development that positively impacts the society at large with a minimal resource footprint; and to be responsible for the Company’s actions and encourage a positive impact through its activities on the environment, communities and stakeholders.
The CSR committee is also responsible for overseeing the activities / functioning of the Infosys Foundation in identifying the areas of CSR activities, programs and execution of initiatives as per pre-defined guidelines. The Foundation, in turn, guides the CSR committee in reporting the progress of deployed initiatives, and making appropriate disclosures (internal / external) on a periodic basis.
The CSR committee charter and the CSR policy of the Company are available on our website (http://www.infosys.com/investors/corporategovernance/ Pages/policies.aspx).
Corporate social responsibility committee report for the year ended March 31, 2016
The CSR report, as required under the Companies Act, 2013 for the year ended March 31, 2016 is attached as Annexure 7 to the Board’s report.
3. Nomination and remuneration committee
Our nomination and remuneration committee comprised four independent directors as on March 31, 2016 :
• Prof. Jeffrey S. Lehman, Chairperson
• Prof. John W. Etchemendy
• Kiran Mazumdar-Shaw
• R. Seshasayee
Prof. John W. Etchemendy was appointed a member of the nomination and remuneration committee effective April 24, 2015. While K. V. Kamath ceased to be a member of the nomination and remuneration committee effective June 5, 2015, Carol M. Browner ceased to be a member effective November 23, 2015.
The purpose of the committee is to screen and to review individuals qualified to serve as executive directors, non-executive directors and independent directors, consistent with criteria approved by the Board, and to recommend, for approval by the Board, nominees for election at the AGM. It also designs, benchmarks and continuously reviews the compensation program for our CEO and MD, senior executives and the Board against the achievement of measurable performance goals, and structures senior executive compensation to ensure it is competitive in the global markets in which we operate to attract and retain the best talent.
The committee makes recommendations to the Board on candidates for (i) nomination for election or re-election by the shareholders; and (ii) any Board vacancies that are to be filled. It may act on its own in identifying potential candidates, inside or outside the Company, or may act upon proposals submitted by the Chairman of the Board.
The nomination and remuneration committee annually reviews and approves for the CEO and MD, the executive directors and executive officers : (a) the annual base salary; (b) the annual incentive bonus, including the specific performance-based goals and amount; (c) equity compensation; (d) employment agreements, severance arrangements, and change in control agreements / provisions; and (e) any other benefits, compensation or arrangements.
It reviews and discusses all matters pertaining to candidates and evaluates the candidates. The nomination and remuneration committee coordinates and oversees the annual self-evaluation of the Board and of individual directors. It also reviews the performance of all the executive directors on a half-yearly basis or at such intervals as may be necessary on the basis of the detailed performance parameters set for each executive director at the beginning of the year. The nomination and remuneration committee may also regularly evaluate the usefulness of such performance parameters, and make necessary amendments.
The nomination and remuneration committee charter and policy are available on our website (https://www.infosys.com/investors/corporategovernance/ Documents/nomination-remuneration-committee-charter.pdf). Nomination and remuneration committee report for the year ended March 31, 2016
The committee believes that recruitment, motivation and retention of outstanding senior leadership are crucial to promoting a robust future for the Company. Therefore, the committee has adopted a detailed process to ensure that the Board selects, motivates, and retains the right candidates for senior leadership positions in keeping with the policy devised on Board diversity.
During the year, the committee recommended the re-appointment of Dr. Vishal Sikka as CEO and MD on new terms and conditions, effective from April 1, 2016, until March 31, 2021. In recommending Dr. Sikka’s re-appointment, the committee discussed the outstanding initiatives taken by Dr. Sikka towards restoring the Company as industry leader, which have already begun to show results. The committee also noted that the Management, under the leadership of Dr. Sikka, has drawn up goals for revenue, margins, and revenue per person for the financial year 2020-21 which are expected to be achieved progressively over the next five years. The committee was of the view that Dr. Sikka’s leadership will be essential to achieving these goals and, therefore, recommended that Dr. Sikka’s contract of employment be replaced with a new contract aligned to these goals, as well as to shareholder value creation.
During the year, the committee also nominated Dr. Punita Kumar-Sinha to the Board. Dr. Kumar-Sinha has focused on investment management and financial markets during her 27-year career. She spearheaded some of the first foreign investments into the Indian equity markets in the early 1990s. Currently, she is the Founder and Managing Partner, Pacific Paradigm Advisors, an independent investment advisory and management firm focused on Asia.
Dr. Kumar-Sinha is also a senior advisor and serves as an independent director for several companies. Prior to founding Pacific Paradigm Advisors, she was a Senior Managing Director of Blackstone and the Chief Investment Officer of Blackstone Asia Advisors. Dr. Kumar-Sinha was also the Senior Portfolio Manager and CIO for The India Fund (NYSE:IFN), the largest India Fund in the US, for almost 15 years,
The Asia Tigers Fund (NYSE:GRR), and The Asia Opportunities Fund. At Blackstone Asia Advisors, Dr. Kumar-Sinha led the business and managed teams in the U.S., India, and Hong Kong. Prior to joining Blackstone, Dr. Kumar-Sinha was a Managing Director and Senior Portfolio Manager at Oppenheimer Asset Management Inc., and CIBC World Markets, where she helped open one of the first India advisory offices for a foreign firm. She also worked at Batterymarch (a Legg Mason company), Standish Ayer & Wood (a BNY Mellon company), JP Morgan and IFC / World Bank.
Dr. Kumar-Sinha has been frequently featured in the media, including : The Financial Times, The New York Times, The Wall Street Journal, Barron’s, Forbes, CNN, CNBC, Fox News, Star News, Bloomberg, ET Now and The Economic Times. She has also anchored a TV series on ET Now on various global economies, key Indian policy issues and their impact on capital markets. Dr. Kumar-Sinha has been a speaker at many forums and many of her contributions at seminars and conferences have projected the potential and prospects of Asia as an investment destination.
Dr. Kumar-Sinha has a Ph.D. and a Masters in Finance from the Wharton School, University of Pennsylvania. She received her undergraduate degree in chemical engineering with distinction from the Indian Institute of Technology, New Delhi. She has an MBA and is also a CFA Charter holder. Dr. Kumar-Sinha is a member of the CFA Institute, the Boston Security Analysts Society and the Council on Foreign Relations. She is a Charter member and was a Board member of TIE-Boston. Dr. Kumar-Sinha has been awarded the Distinguished Alumni Award from IIT Delhi.
The committee recommended the re-appointment of Prof. Jeffrey S. Lehman as independent director. Prof. Lehman was due for retirement from his first term as independent director after the notification of the new Companies Act, 2013 on April 13, 2016. Based on his skills, experience, knowledge, and performance evaluation, it was proposed that Prof. Lehman be re-appointed for another term of two years from April 14, 2016 to April 13, 2018, as an independent director. Prof. Lehman was excused from all discussions and votes associated with his nomination.
During the year, the committee discussed the retirement of the Board according to statutory requirements. As per the provisions under the Companies Act, 2013, independent directors are not liable to retire by rotation. As such, none of the independent directors will retire at the ensuing AGM. Further, following the provisions of the Companies Act, 2013, Dr. Vishal Sikka will retire in the ensuing AGM. The committee considered his performance and recommended that the shareholders may consider the necessary resolutions for the re-appointment of Dr. Sikka.
During the year, the committee recommended and approved the 2015 Stock Incentive Compensation Plan (‘the 2015 Plan’) and grant of stock incentives to eligible employees of the Company and its subsidiaries. The stock incentives are proposed to be issued under the 2015 Plan. The purpose of the 2015 Plan is to :
• Attract, motivate, and retain talented and critical employees;
• Encourage employees to align individual performance with Company objectives; and
• Reward employee performance with ownership.
The 2015 Plan provides for grant stock incentives to eligible employees such as restricted stock units (RSUs) and stock options (together ‘Stock Incentives’). Subject to applicable law and conditions for exercise, eligible employees are entitled to receive equity shares, American Depositary Receipts (ADRs) or cash on exercise of the Stock Incentives.
The Stock Incentives vest over a period of four years from the date of the grant, or such other period as decided by the committee. The 2015 Plan shall be administered by the committee which is designated as the ‘Compensation Committee’ for the administration and superintendence of the 2015 Plan. Each Stock Incentive shall be evidenced by an award agreement specifying terms and conditions including whether the eligible employees will get equity shares of the Company, ADRs of the Company, or cash on exercise of the Stock Incentives.
During the year, the committee under the guidance of the Board also formulated the criteria and framework for the performance evaluation of every Director on the Board, including the executive and independent directors and identified ongoing training and education programs to ensure that the non-executive directors are provided with adequate information regarding the business, the industry, and their legal responsibilities and duties.
4. Risk and strategy committee
Our risk and strategy committee comprised five independent directors as on March 31, 2016 :
• Ravi Venkatesan, Chairperson
• Prof. John W. Etchemendy
• Kiran Mazumdar-Shaw
• R. Seshasayee
• Roopa Kudva
Roopa Kudva and Prof. John W. Etchemendy were appointed as members of the risk and strategy committee effective April 24, 2015. Carol M. Browner ceased to be a member effective November 23, 2015.
The purpose of the risk and strategy committee is to assist the Board in fulfilling its corporate governance duties by overseeing the responsibilities with regard to the identification, evaluation and mitigation of operational, strategic and environmental risks. The risk and strategy committee has the overall responsibility of monitoring and approving the risk policies and associated practices of the Company. It is also responsible for reviewing and approving risk disclosure statements in public documents or disclosures.
The risk and strategy committee charter is available on our website (http://www.infosys.com/investors/corporate-governance/Pages/policies. aspx). Further, the risk and strategy framework of the Company is part of the
Risk management report section of the Annual Report. March 31, 2016
The committee reviewed the Company’s risk management practices and activities on a quarterly basis. This included a review of risks to the achievement of key business objectives covering growth, profitability, talent aspects, operational excellence and actions taken to address these risks.
Further, the trend lines of top risks in terms of exposure, risk levels, potential impact and progress of mitigation plans were reviewed along with key operational risks. According to the scheduled annual calendar, the committee reviewed risk management in the areas of competitive position in key market segments, business momentum relative to competition, talent supply chain and engagement, information security, high-risk projects, contracts management and financial risks. The committee also reviewed and discussed priorities of risk mitigation. The members of the committee conducted deep dive exercises in the areas of quality, talent and cyber-security.
The committee shared regular updates with the Board regarding all aspects of risk management. While acknowledging the competitive and dynamic nature of the business environment, the committee believes that the Infosys risk framework, along with risk assessment, monitoring, mitigation and reporting practices, is adequate to effectively manage the foreseeable material risks. In conclusion, the committee is sufficiently satisfied that it has complied with its responsibilities as outlined in the risk and strategy committee charter.
5. Stakeholders relationship committee
The stakeholders relationship committee has the mandate to review and redress shareholder grievances. Our stakeholders relationship committee comprised three independent directors as on March 31, 2016 :
• Prof. Jeffrey S. Lehman, Chairperson
• Prof. John W. Etchemendy
• Ravi Venkatesan
R. Seshasayee ceased to be a member of the stakeholders relationship committee effective April 24, 2015.
Prof. John W. Etchemendy was appointed as member of the stakeholders relationship committee effective April 24, 2015.
The Board appointed A. G. S. Manikantha as the Compliance Officer for SEBI listing regulations with effect from December 1, 2015.
6. Finance and investment committee
The Board constituted the finance and investment committee to assist it in overseeing acquisitions and investments made by the Company and provide oversight on key investment policies of the Company. The finance and investment committee comprises independent members of the Board and has a minimum of three members. The charter states that the chairperson, in consultation with other committee members, would set the agenda for and preside at the meetings. A quorum for the transaction of business at any meeting of the finance and investment committee consists of a majority of committee members, and decision is made by a majority of those present at the meeting.
The finance and investment committee comprised four independent directors as on March 31, 2016 :
• Roopa Kudva, Chairperson
• Prof. John W. Etchemendy
• Kiran Mazumdar-Shaw
• Ravi Venkatesan
The finance and investment committee is responsible for :
• Discussing, reviewing and approving the overall acquisition and investment strategy of the Company in terms of broad business objectives to be met, overall fund allocation and areas of focus for investments and acquisitions
• Considering and approving proposals for acquisitions and investments up to certain threshold amounts of exposure as approved by the Board
• Periodically reviewing the status of acquisitions and investments in terms of business objectives met, status of integration of acquired companies, risk mitigation and financial returns
• Periodically reviewing the treasury policy of the Company, including investment of surplus funds and foreign currency operations
• Conducting an annual self-review of its own effectiveness
• Updating the Board on a periodic basis about the committee’s deliberations and decisions
The finance and investment committee has direct access to, and open communications with, the senior leaders of the Company. It may also retain independent consultants on a need basis and determine a suitable compensation for them.
Finance and investment committee report for the year ended March 31, 2016
During the year, the committee discussed, reviewed and approved the overall acquisition and investment strategy of the Company in terms of broad business objectives to be met, overall fund allocation and areas of focus for investments and acquisitions. It also considered and approved the proposals for acquisitions and investments up to certain threshold amounts of exposure as approved by the Board.
The status of acquisitions and investments was reviewed, with a focus on the business objectives met, integration of acquired companies, risk mitigation and financial returns. The committee was also briefed about, and approved, the Infosys Innovation Fund set up to help start-ups by providing early-stage capital, product validation, customer introductions and joint go-to-market scale.
The committee also took stock of its overall effectiveness and updated the Board on the deliberations and decisions taken during the year. The committee had direct access to, and open communications with the senior leaders of the Company. It may also retain independent consultants on a need basis and determine the suitable compensation for such consultants.
D. Management review and responsibility
Formal evaluation of officers
The nomination and remuneration committee of the Board approves the compensation and benefits for all executive Board members. A committee headed by our CEO and MD reviews, evaluates and decides the annual compensation of our officers from the level of the Vice President upwards.
The non-executive Chairman, the CEO and MD, the COO and Whole-time Director and the CFO represent the Company in interactions with investors, the media and various governments. In addition, the CEO and MD, and the COO and Whole-time Director manages interactions with clients and employees.
We have an integrated approach to managing risks inherent in various aspects of our business. The Risk management report forms part of this Annual Report.
Management’s discussion and analysis
A detailed report on our Management’s discussion and analysis forms part of this Annual Report.
Disclosures regarding the appointment or re-appointment of directors As per the provisions of the Companies Act, 2013, Dr. Vishal Sikka will retire in the ensuing AGM and being eligible, seek re-appointment.
The Board recommends his re-appointment.
The Companies Act, 2013 provides for the appointment of independent directors. Sub-section (10) of Section 149 of the Companies Act, 2013 (effective April 1, 2014) provides that independent directors shall hold ffice for a term of up to five consecutive years on the board of a company; and shall be eligible for re-appointment on the passing of a special resolution by the shareholders of the Company. Accordingly, all independent directors were appointed by the shareholders either at the general meeting or through postal ballot as required under Section 149(10).
Further, Section 149(11) states that no independent director shall be eligible to serve on the board for more than two consecutive terms of five years. Sectin 149(13) states that the provisions of retirement by rotation as defined in sub-sections (6) and (7) of Section 152 of the Act shall not apply to such independent directors. None of the independent directors will retire at the ensuing AGM.
Communication to the shareholders
The quarterly report, along with additional information and official news releases, are posted on our website, www.infosys.com. The reports contain select financial data extracted from the audited consolidated financial statements under the IFRS (INR), and unaudited consolidated financial statements under the IFRS (USD). Moreover, the quarterly / annual results and official news releases are generally published in The Economic Times, The Times of India, Business Standard, Business Line, Financial Express and Udayavani (a regional daily published from Bangalore). Quarterly and annual financial statements, along with segmental information, are also posted on our website, www.infosys.com. Earnings calls with analysts and investors are broadcast live on our website and their transcripts are also published on the website. The proceedings of the AGM are webcast live for shareholders across the world. The AGM presentations, transcripts and video archives are available on our website, www.infosys.com. Further, Form 20-F filed with the Securities and Exchange Commission also contains detailed disclosures and is available on our website, www.infosys.com.
Investor grievance and share transfer
We have a Board-level stakeholders relationship committee to examine and redress complaints by shareholders and investors. The status of complaints and share transfers is reported to the entire Board.
The details of shares transferred and the nature of complaints are provided in the Shareholder information section of the Annual Report. For shares transferred in physical form, the Company provides adequate notice to the seller before registering the transfer of shares. The stakeholders relationship committee will meet as often as required to approve share transfers. For matters regarding shares transferred in physical form, share certificates, dividends, and change of address, shareholders should communicate with Karvy Computershare Private Limited, our registrar and share-transfer agent. Their address is published in the Shareholder information section of the Annual Report. Share transactions are simpler and faster in electronic form. After a confirmation of a sale / purchase transaction from the broker, shareholders should approach the depository participant with a request to debit or credit the account for the transaction. The depository participant will immediately arrange to complete the transaction by updating the account. There is no need for a separate communication to the Company to register the transfer.
Details of non-compliance
No penalty has been imposed by any stock exchange, SEBI or SEC, nor has there been any instance of non-compliance with any legal requirements, or on matters relating to the capital market over the last three years.
Auditors’ certificate on corporate governance
As required by Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, the Auditors’ certificate on corporate governance is annexed to the Board’s report. In addition to the certificate by the auditors, the Practicing Company Secretary has also issued a certificate on corporate governance as part of the secretarial audit.
CEO and CFO certification
As required by SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, the CEO and CFO certification is provided in this Annual Report.
Code of conduct
In compliance with Regulation 26(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015 and the Companies Act, 2013, the Company has framed and adopted a Code of Conduct and Ethics (‘the Code’). The Code is applicable to the members of the Board, the executive officers and all employees of the Company and its subsidiaries. The Code is available on our website, www.infosys.com. All members of the Board, the executive officers and senior financial officers have affirmed compliance to the Code as on March 31, 2016. A declaration to this effect, signed by the CEO and MD and the CFO, forms part of the CEO and CFO certification.
Prevention of insider trading
The Company has adopted an Insider Trading Policy to regulate, monitor and report trading by insiders under the SEBI (Prohibition of Insider Trading) Regulations, 2015. This policy also includes practices and procedures for fair disclosure of unpublished price-sensitive information, initial and continual disclosure. The Company has automated the declarations and disclosures to identified designated employees, and the Board reviews the policy on a need basis. The policy is available on our website (https://www.infosys.com/investors/corporategovernance/ Pages/policies.aspx).
Procedure for postal ballot
In compliance with Sections 108 and 110 and other applicable provisions of the Companies Act, 2013, read with the related Rules, the Company provides electronic voting (e-voting) facility to all its members. The Company engages the services of NSDL for the purpose of providing e-voting facility to all its members. The members have the option to vote either by physical ballot or through e-voting.
The Company dispatches the postal ballot notices and forms along with postage prepaid business reply envelopes to its members whose names appear on the register of members / list of beneficiaries as on a cut-off date. The postal ballot notice is sent to members in electronic form to the email addresses registered with their depository participants (in case of electronic shareholding) / the Company’s registrar and share transfer agents (in case of physical shareholding). The Company also publishes a notice in the newspaper declaring the details of completion of dispatch and other requirements as mandated under the Act and applicable Rules.
Voting rights are reckoned on the paid-up value of the shares registered in the names of the members as on the cut-off date. Members desiring to exercise their votes by physical postal ballot forms are requested to return the forms, duly completed and signed, to the scrutinizer on or before the close of the voting period. Members desiring to exercise their votes by electronic mode are requested to vote before close of business hours on the last date of e-voting.
The scrutinizer submits his report to the Chairman, after the completion of scrutiny, and the consolidated results of the voting by postal ballot are then announced by the Chairman / authorized officer. The results are also displayed on the Company website, www.infosys.com, besides being communicated to the stock exchanges, depository and registrar and share transfer agent. The last date for the receipt of duly completed Postal Ballot Forms or e-voting shall be the date on which the resolution would be deemed to have been passed, if approved by the requisite majority.
Remote e-voting and ballot voting at the AGM
To allow the shareholders to vote on the resolutions proposed at the AGM, the Company has arranged for a remote e-voting facility. The Company has engaged NSDL to provide e-voting facility to all the members. Members whose names appear on the register of members as on June 11, 2016 shall be eligible to participate in the e-voting. The facility for voting through ballot will also be made available at the AGM, and the members who have not already cast their vote by remote e-voting can exercise their vote at the AGM.
F. Compliance with the corporate governance codes
We have always believed in maximum fiscal transparency, and benchmarked our disclosures against a host of national and international guidelines and regulations. Some of the notable ones among them are as follows :
Corporate Governance Voluntary Guidelines, 2009 : The Corporate Governance Voluntary Guidelines, 2009, of the Ministry of Corporate Affairs (MCA), Government of India encourage the use of better practices through voluntary adoption. These guidelines broadly focus on areas such as the Board and its responsibilities, functions, roles and responsibilities of the audit committee, appointment of auditors, compliance with secretarial standards, and a mechanism for whistleblower support. We comply with the Corporate Governance Voluntary Guidelines.
SEBI Listing Regulations : The SEBI Listing Regulations (LODR) prescribes various corporate governance recommendations in line with the corporate governance committee constituted by SEBI under the chairmanship of N. R. Narayana Murthy which had issued two sets of mandatory and non-mandatory recommendations. These recommendations were eventually incorporated in Clause 49 of the Listing Agreement, and the revised Clause 49 was made effective October 1, 2014. Further, the SEBI Listing Regulations have incorporated these recommendations. We comply with the corporate governance requirements under the Listing Regulations.
Non-mandatory items of corporate governance
The Company has also ensured the implementation of non-mandatory items such as:
• Separate posts of Chairman, and CEO & MD, and reimbursement of expenses in the performance of duties
• Unmodified audit opinions / reporting
• The internal auditor reports directly to the audit committee Naresh Chandra Committee : Following instances of irregularities involving auditors in the U.S. and India, the Government of India constituted a high-level committee under the chairmanship of Naresh Chandra in 2002 to examine the auditor-company relationship and to regulate the role of auditors. Chapters 2, 3 and 4 of the Naresh Chandra Committee report are relevant to us. We comply with these recommendations.
Kumar Mangalam Birla Committee : SEBI appointed a committee under the chairmanship of Kumar Mangalam Birla in 1999 to promote and raise the standards of corporate governance. The recommendations of the committee were adopted in 2000. We comply with these recommendations.
Euro shareholders Corporate Governance Guidelines 2000 :
The guidelines issued by Euroshareholders, the confederation of European shareholders associations, are based on the general principles of corporate governance issued by the Organization for Economic Co-operation and Development (OECD) in 1999, but are more specific and detailed. Subject to the statutory regulations in force in India, we comply with these recommendations. Conference Board Commission on Public Trust and Private
Enterprises in the U.S. : We substantially comply with the findings and recommendations of the Commission, which primarily addressed three key areas – executive compensation, corporate governance, and audit and accounting issues.
OECD Principles of Corporate Governance : The OECD principles on corporate governance were first released in 1999 and revised in 2014, and continue to be periodically reviewed. We comply with the recommendations of the OECD.
United Nations Global Compact : The United Nations Global Compact (UNGC) is a strategic policy initiative for businesses that are committed to aligning their operations and strategies with its 10 principles which cover human rights, labor, environment and corruption. We have been a signatory to the UNGC since 2001 and have consistently adopted the 10 principles in our corporate governance framework. The Global Compact incorporates a transparency and accountability policy known as the Communication on Progress (COP). As a signatory to the UNGC, we report our progress to UNGC’s COP every year. UNGC also recommends standard tools for reporting organizations on the COP such as the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP) frameworks. We follow the GRI G4 reporting guidelines for our sustainability reporting and are a signatory to the CDP. We have been identified as a company leading climate change action. We have secured a score of 92, which has earned us a ‘Performance Band A’ rating on the CDP’s Global Climate Performance Leadership Index (CPLI) and Supplier Climate Performance Leadership Index (SCPLI).
Risk management report
The risk management report discusses various dimensions of our enterprise risk management. The risk-related information outlined in this section may not be exhaustive. The discussion may contain statements that are forward-looking in nature. Our business is subject to uncertainties that could cause actual results to differ materially from those reflected in the forward-looking statements. Readers are advised to refer to the detailed discussion of risk factors and related disclosures in our regulatory filings, and exercise their own judgment in assessing risks associated with the Company.
Our Enterprise Risk Management (ERM) framework encompasses practices relating to the identification, analysis, evaluation, treatment, mitigation and monitoring of the strategic, external and operational controls risks to achieving our key business objectives. ERM at Infosys seeks to minimize the adverse impact of these risks, thus enabling the Company to leverage market opportunities effectively and enhance its long-term competitive advantage.
Several risks can impact the achievement of a particular business objective. Similarly, a single risk can impact the achievement of several business objectives. The focus of risk management is to assess risks and deploy mitigation measures. This is done through periodic review meetings of the risk and strategy committee of the Board. Our core values and ethics provide the platform for our risk management practices.
2. Business objectives
The business objectives of the Company are articulated as a set of specific near-term goals, and long-term strategic goals in a corporate scorecard. These goals cover the dimensions of consistent financial performance, market penetration, differentiation in solutions, services and operational excellence, leveraging talent and long-term sustainability of the organization.
3. Risk categories
Our risk management framework considers the following broad categories of risks :
Risks arising out of the choices we have made in defining our strategy and the risks to the successful execution of these strategies are covered in this category – for example, risks inherent to our industry and competitiveness are analyzed and mitigated through strategic choices of target markets, the Company’s market offerings, business models and talent base. Details of the Company’s strategy are described in other sections of this document. Potential risks to the long-term scalability and sustainability of the organization are also analyzed and mitigated – for example, societal risks relating to the impact of our strategy on the environment, local communities, and conservation of essential resources.
We periodically assess risks to the successful execution of our strategy, such as the effectiveness of strategic programs that are being executed, the momentum in new initiatives, the impact of strategy on financial performance, leveraging of inorganic strategies, effectiveness of organization structure and processes, retention and development of high-performing talent and leadership.
Risks arising out of uncontrollable factors from outside the organization are covered in this category – for example, risks of adverse developments in the regulatory environment in which we operate, unfavorable trends in the macroeconomic environment including currency fluctuations, natural disasters and attacks on our physical and technology infrastructure.
Risks arising out of inefficiencies in the design, operations or systems of internal controls are covered in this category – for example, risks of non-compliance to policies, information security, data privacy, intellectual property, individuals engaging in unlawful or fraudulent activity or breaches of contractual obligations. These risks could typically result in penalties, financial loss, litigation and loss of reputation and are assessed primarily on dimensions such as business process effectiveness, segregation of duties, compliance with policies and procedures, and strength of underlying controls. These risks also nclude counterparty risks arising from our association with entities for conducting business, namely clients, vendors, alliance partners and their respective industries.
4. Risk management processes
The Company’s risk management practices are :
Risk identification, analysis, and evaluation
Mechanisms for identification of risks include annual risk surveys across the Company, industry benchmarking, periodic assessments of the business environment, incident analysis, findings of internal audits, discussions with the risk council and the risk and strategy committee and analysis of the Company’s performance relative to the corporate scorecard goals. Risk analysis and evaluation is carried out using scenario-based assessments to decide the potential impact, likelihood of occurrence and in some cases, the detectability of the risk. Estimated risks are compared with established risk criteria and thresholds to determine the priority and method of risk treatment.
Risk treatment is the process of selecting and implementing measures to alleviate the impact of identified risks.
• Avoid : A decision to nullify the risk by refraining from the activities that cause it
• Transfer : A decision to transfer the specific risk to another entity
• Reduce : A decision to reduce the level of risk through targeted mitigation, if not to completely nullify it
• Accept : A decision to allow the risk to remain as is, irrespective of its severity
Risk mitigation and monitoring
Mitigation plans are finalized, owners are identified and the progress of mitigation actions are monitored and reviewed. The risk and strategy committee periodically does a deep dive into understanding the scope and effectiveness of mitigation plans and provides feedback to mitigation teams.
Risk-based approach to strategic planning
At Infosys, the functions of strategic planning and risk management are intertwined. Risks to achieving business objectives are key inputs to the formulation and development of strategy and business planning. Key strategic initiatives are identified to mitigate specific risks. This approach is practiced at various levels of the Company, such as in client account teams, project teams, support departments and subsidiaries.
Risk reporting and disclosures
Dashboards help track external and internal indicators for each identified risk and assess its severity. The trend line assessment of top risks, analysis of exposure and potential impact are carried out periodically, presented and discussed with the risk council and risk and strategy committee. Key external and internal incidents are reported and reviewed at appropriate fora, such as the Information Security Council and meetings of the executive board. Risks relating to client project execution and client account level risks are reported and discussed at appropriate levels within the Company. Periodic updates are provided to the Board highlighting key risks, their impact and mitigation actions. Key risk factors are disclosed in regulatory filings.
C. Risk management highlights for the year
During the last fiscal, our risk management practices were primarily focused on the effectiveness of strategic programs in improving our competitive position and differentiation in market segments, the momentum of new initiatives to achieve our long-term business aspirations, our preparedness to address any incidents that may cause business disruptions to our physical and technological infrastructure, strengthening internal controls to detect fraudulent activity, leadership development and monitoring possible impact of changes in our regulatory environment.
We carried out the following risk management activities during the last fiscal :
• An annual risk survey was conducted across functions to get inputs on key risks to the achievement of business objectives, their prioritization and mitigation actions to minimize impact.
• Top risks were reviewed and discussed with the risk council and the risk and strategy committee. Deep dive assessments were done in identified areas by members of the committee.
• Risk assessment of our business momentum relative to competition and competitive position in key market segments comprising geographies, industries and service lines were conducted and actions were reviewed.
• Regularly assessed business environment including trend-line of key external indicators and internal business indicators along with assessments by market segments, top clients' growth, currency risk and credit risk.
• Reviewed key operational risks and actions based on inputs from the internal risk register, external assessments, internal audit findings and incidents. Reviewed operational risk areas including client service delivery, information security (cyber attacks and threat intelligence), women’s safety, physical security, succession planning and business continuity management.
• Monitored key developments in the regulatory environment relating to visas, immigration laws and impact assessments.
• Monitored availability of natural resources, such as water and power and its impact on our operations.
Infosys was incorporated in Pune, in 1981, as Infosys Consultants Private Limited, a private limited company under the Indian Companies Act, 1956. In 1983, the corporate headquarters was relocated to Bangalore. The name of the Company was changed to Infosys Technologies Private Limited in April 1992 and to Infosys Technologies Limited in June 1992, when the Company became a public limited company. We made an initial public offering in February 1993 and were listed on stock exchanges in India in June 1993. Trading opened at Rs. 145 per share, compared to the IPO price of Rs. 95 per share. In October 1994, we made a private placement of 5,50,000 shares at Rs. 450 each to Foreign Institutional Investors (FIIs), Financial Institutions (FIs) and body corporates.
In March 1999, we issued 20,70,000 American Depositary Shares (ADSs) (equivalent to 10,35,000 equity shares of par value Rs. 10 each) at US $34 per ADS under the ADS Program, and the same were listed on the NASDAQ National Market. All the above data is unadjusted for stock split and bonus shares. During July 2003, June 2005 and November 2006, we successfully completed secondary sponsored ADR issues of US $294 million, US $1.1 billion and US $1.6 billion, respectively.
During fiscal 2012, we changed our name from Infosys Technologies Limited to Infosys Limited to mark the transition from being a technology services provider to a business transformation partner for our clients. During fiscal 2013, we delisted our ADSs from NASDAQ, and listed the same in the New York Stock Exchange (NYSE), Euronext London and Euronext Paris markets. The delisting and listing was made to leverage the Euronext partnership, since both the U.S. and Europe are home to many of our investors, clients and employees.
The Company’s financial year begins on April 1 and ends on March 31, every year. The address of our registered office is Electronics City, Hosur Road, Bangalore 560 100, Karnataka, India
Annual General Meeting
Date and time: June 18, 2016, Saturday, 3:00 p.m. IST
Venue : The Christ University Auditorium, Hosur Road, Bangalore 560 029 Book closure date June 11, 2016
Dividend payment date June 20, 2016
We are committed to maintaining the highest standards of corporate governance. In continuation of our efforts in that direction, we have provided a synopsis of some of your rights and responsibilities as a shareholder on our website, www.infosys.com. We encourage you to visit our website and read the document. We hope that the document will give you appropriate guidance, and answer any questions regarding your rights as a shareholder.
Dematerialization of shares and liquidity
Infosys shares are tradable compulsorily in the electronic form. Through Karvy Computershare Private Limited, Registrars and Share Transfer Agents, we have established connectivity with both the depositories, that is, National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL).
The International Securities Identification Number (ISIN) allotted to our shares under the Depository System is INE009A01021. As on March 31, 2016, 99.79% of our shares were held in dematerialized form and the rest in physical form.
We were the first company in India to pay a one-time custodial fee of Rs. 44.43 lakh to NSDL. Consequently, our shareholders do not have to pay depository participants the custodial fee charged by NSDL on their holding.
Pursuant to Section 204 of the Companies Act, 2013 and Rules thereunder, the Board of Directors of the Company appointed Parameshwar G. Hegde, Practicing Company Secretary, to conduct Secretarial Audit of records and documents of the Company.
The Secretarial Audit Report confirms that the Company has complied with all the applicable provisions of the Companies Act, 2013, Depositories Act, 1996, Listing Agreements with the Stock Exchanges, and all the Regulations and Guidelines of the Securities and Exchange Board of India (SEBI), as applicable to the Company. The audit also covers the reconciliation on a quarterly basis, the total admitted capital with NSDL and CDSL, and the total issued and listed capital. The audit has confirmed that the total issued / paid-up capital is in agreement with the aggregate total number of shares in physical form and the total number of dematerialized shares held with NSDL and CDSL. Further, the Company voluntarily adheres to the various Secretarial Standards issued by the Institute of Company Secretaries of India.
We attended to most of the investors’ grievances / correspondences within a period of 10 days from the date of receipt of such grievances. The exceptions have been for cases constrained by disputes or legal impediments.
Designated email address for investor services
In terms of Regulation 62(C) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the designated email address for investor complaints is firstname.lastname@example.org.
There are certain pending cases related to disputes over title to shares in which we had been made a party. However, these cases are not material in nature.
Share transfers in physical form
Shares sent for physical transfer are effected after giving a 15-day notice to the seller for confirmation of the sale. Our share transfer committee meets as often as required. The total number of shares transferred in physical form during the year was 15,000, as against 70 for the previous year.
Listing on stock exchanges
Codes India Global
NSE: BSE : NYSE
Exchange: INFY 500209: INFY
Reuters : INFY.NS : INFY.BO : INFY.K
Bloomberg : INFO IS : INFO IB: INFY UN
The listing fees for fiscal 2016 have been paid for all of the above stock exchanges in India and overseas.
ISIN Code for ADS : US4567881085
Shareholding pattern of the Company in detail is presented in MGT-9 enclosed to the Board’s report as Annexure 6.
Stock market data relating to shares listed in India and NYSE
Our market capitalization is included in the computation of the BSE 30 Sensitive Index (Sensex), the BSE Dollex, the S&P CNX NIFTY Index,
Dow Jones Global Titans 50 and NYSE. The monthly high and low quotations, as well as the volume of shares traded at the BSE, the NSE, and
NYSE for the current year are provided as follows
Our ADSs, as evidenced by American Depositary Receipts (ADRs), are traded in the U.S. on the NYSE at New York, Euronext London and Euronext
Paris under the ticker symbol ‘INFY’. The currency of trade of ADS in the U.S. is USD and at London and Paris is Euro (EUR). Each equity share is represented by one ADS. The ADRs evidencing ADSs began trading on the NYSE, New York, from December 12, 2012, and Euronext London and Paris from February 20, 2013, when they were listed pursuant to the Listing Agreement entered with the NYSE. As on March 31, 2016, there were 30,199 record holders of ADRs evidencing 385,317,937 ADSs (1 ADS = 1 equity share).
Share price chart
We caution that the historical stock price performance shown in the following graph should not be considered indicative of potential future stock price performance.
For queries relating to financial statements
M. D. Ranganath Chief Financial Officer Tel : 91 80 2852 1692 Fax : 91 80 2852 0754 Email : email@example.com
Sandeep Mahindroo AVP - Financial Controller and Head - Investor Relations Tel : 91 80 3980 1018 Fax : 91 80 2852 0754 Email : firstname.lastname@example.org
For queries relating to shares / dividend / compliance
A. G. S. Manikantha Company Secretary Tel : 91 80 4116 7775 Fax : 91 80 2852 0754 Email : email@example.com
For queries relating to business responsibility report
Aruna C. Newton Associate Vice President Tel : 91 80 2852 0261 Email : firstname.lastname@example.org
Registrar and share transfer agents
Karvy Computershare Private Limited Plot 31-32, Gachibowli, Financial District Nanakramguda, Hyderabad – 500 032
Shobha Anand Assistant General Manager Tel : 91 40 67161559 Email : email@example.com
Depository bank (ADS)
Deutsche Bank Trust Company Americas
Deutsche Bank, 60 Wall Street, 16th Floor Global Transaction Banking Global Equity Services – Depositary Receipts New York 10005, NY, U.S. Tel : 1 212 250 2500 Fax : 1 732 544 6346
Deutsche Bank AG, Filiale Mumbai Global Transaction Banking / Global Equity Services – Depositary Receipts, The Capital, C-70, G Block Bandra Kurla Complex, Mumbai 400 051, India Tel : 91 22 7180 4444 Fax : 91 22 7180 4122
Custodian in India (ADS)
ICICI Bank Limited Securities Market Services 1st Floor, Empire Complex, 414, Senapati Bapat Marg, Lower Parel, Mumbai 400 013, Maharashtra, India. Tel : 91 22 66672756 / 2019/ 2742 Fax : 91 22 6667 2740
Sponsor Bank for ADS in Europe BNP Paribas Securities Services CTS Services Aux Emetteurs Les Grands Moulins De Pantin 9 Rue du Débarcadere 93761 Pantin Cedex, France Tel : 33 1 42 98 10 00 / 33 1 55 77 40 57
Addresses of regulatory authority / stock exchanges
Securities and Exchange Board of India Plot No. C4-A, G Block, Bandra Kurla Complex Bandra (East), Mumbai 400 051, India Tel : 91 22 2644 9000, 91 22 4045 9000 Fax : 91 22 2644 9019-22, 91 22 4045 9019-22
National Stock Exchange of India Ltd. Exchange Plaza, Plot No. C/1, G Block Bandra Kurla Complex Bandra (East), Mumbai 400 051, India Tel : 91 22 2659 8100 Fax : 91 22 2659 8120
Phiroze Jeejeebhoy Towers Dalal Street, Kala Ghoda, Mumbai 400 001, India Tel : 91 22 2272 1233 Fax : 91 22 2272 1919
New York NYSE Euronext, New York 11 Wall Street, New York, NY 10005, U.S. Tel : 1 212 656 3000 Fax : 1 212 656 5549
Euronext, London Juxon House, 100 St. Paul’s Churchyard London EC4M 8BU Tel : 44 20 7280 6850 / 44 20 7076 0900
Euronext, Paris 14, place des Reflets 92054 Paris La Défense Cedex Tel +33 (0)1 70 48 24 00
Depository for equity shares in India
National Securities Depository Limited Trade World, ‘A’ Wing, 4th Floor Kamala Mills Compound Senapati Bapat Marg, Lower Parel Mumbai 400 013, India Tel : 91 22 2499 4200 Fax : 91 22 2497 6351
Central Depository Services (India) Limited Phiroze Jeejeebhoy Towers, 17th Floor Dalal Street, Fort, Mumbai 400 001, India Tel : 91 22 2272 3333 Fax : 91 22 2272 3199
Our earlier policy was to pay dividend of up to 40% of the consolidated post tax profits. At the Board meeting held on April 24, 2015, the Board decided to increase the dividend payout ratio to up to 50% of consolidated post tax profits effective fiscal 2015.
Section 205A of the Companies Act, 1956 (Section 124 of the Companies Act, 2013) mandates that companies transfer dividend that has been unclaimed for a period of seven years from the unpaid dividend account to the Investor Education and Protection Fund (IEPF). In accordance with the following schedule, the dividend for the years mentioned as follows, if unclaimed within a period of seven years, will be transferred to the IEPF