905 Not only the Corporate Governance issues pointed out by Mr. N.R. Narayana Murthy are to be addressed, but also at macro level Government has to conduct indepth studies of at least half of Corporates in India

There are some similarities and some variances between what is happening in the Board Rooms of Infosys and the Tata Group. We need not lay undue emphasis on differences among Board Members about matters relating to the Managements of their respective Companies. Reason: Differences are natural, and are bound to be there. Like the Meetings of India's Union Cabinet, or the Cabinets of States like Andhra Pradesh, Telangana State, Tamil Nadu, if every thing is conducted without arguments, dissent, some emotional outbursts, with bent heads, knelt knees, UNANIMOUSLY, then there must be something wrong. Whether it is in political democracies, or in Corporate Democracies, such blind-fold meetings can lead to incalculable damage and harm. Such blind-fold, dumb-fold meetings, when conducted in Corporate Bodies, can lead even to financial collapse of Companies. Such blind-fold, dumb-fold meetings, when conducted in Executive Bodies such as Cabinets, Legislatures, Advisory Councils of countries can lead to dictatorships and tyrannies, and finally lead to disintegration of countries.

Here is a link to HIndusthan Times, dated 14th Feb. 2017, which contains some observations made by Shri R. Seshasayee, the Chairman of Infosys, about 'differences' among Board Members, which he terms as "not conflict", but as "convergence". Click to go to Hindusthan Times, http://www.hindustantimes.com/business-news/infosys-management-vs-narayana-murthy-is-the-conflict-really-over/story-2czSEEwLX45xLapMixs4gO.html. Some of the observations:--

“...Something like this doesn’t happen again.”

"...I shall not quit unless asked by the board and the shareholders to do so. ..."

"...the Bansal episode has taught the board to insert severance details in contracts and not be subjective about them. Bansal, was eventually paid Rs. 5 crore as severance pay, not the previously agreed-upon Rs. 17 crore. It was not “hush” money to get Bansal to keep the peace. ..."

"...Sikka's salary has been approved by shareholders. ...".

"... The Board continues to address issues all stakeholders, including ones that the founders have, within the overall framework of the fiduciary responsibility it has to all shareholders. ...".

"...Board will treat the promoters just as it does 'any other shareholders' ...".

Here is a report which contains the observations of the Shri N.R. Narayana Murthy, one of the top five Founders of Infosys: Click to go to EconomicTimes.IndiaTimes,com to study what Mr. Narayana Murthy is reported to have said.

"...There is no let-up in my demand that the board of India’s second-largest software company satisfactorily address the issues of poor corporate governance pinpointed by me last week, striking a firm stance in what looks set to be a fractious corporate battle. ..."
“No, I have not withdrawn my concern,”

"...They (issues and concerns) have to be addressed properly by the board, and full transparency should be given and people responsible should become accountable...".

"...They are all good-intentioned people of high integrity, but obviously being human even good people sometimes make mistakes, this is one such case, ..."

"...But good leadership demands that they listen to all concerned shareholders, re-evaluate their decision and take corrective action. I hope they take corrective action soon and improve governance for a better future for the company..."

"...Such payments raise doubts whether the company is using such payments as hush money to hide something...".

Shri Balakrishnan: "... If investigations have proved there was nothing wrong, then why stop? Someone has to own this up. The chairman should take responsibility. ..."

"...Infosys board be recast with “some good people” like Marti Subrahmanyam. It should also induct unnamed former Infoscions, schooled in the Infosys values ...”.

ybrao-a-donkey's perceptions, which are not intended to be imposed on others

Out of the top four Info Giants in India of those days (TCS, Infosys, Wipro, Satyam Computers), the last i.e. Satyam Computers made an ignominous exit, as fudging of accounts by the then Satyam Management led by Shri Ramalinga Raju blew up, sending him to Jail. The remaining three IT Giants maintain a public profile which claim "honesty and truthfulness". While nobody knows what happens in those remaining Top Three Companies, and people go by revealed Financial Statements and Data, as certified by their Company Auditors.

One thing is definite. Since the 2008 Sub-Prime Lending Crisis which engulfed U.S.A. and the Wall Street, the Business Environment for Indian IT Companies has also undergone some unfavourable changes. In tune with those unfavourable changes, the three IT Companies ought to have made substantial provisions for unforeseen losses, but it is not clear to what extent they have made provisions.

The five top promoters of the Infosys (Sarvashri N.R. Narayana Murthy, Nandan Nilekani, SD Shibulal, Kris Gopalakrishnan and K Dinesh, seem to have withdrawn a major part of their investments from Infosys. They are said to hold, all of them together, about 12.75% stake in the Company. It can also be observed that , when the going is good, when the Business Environment is favorable, everybody will come forward to work as Chairman, CEO, CFO, so that they can take credit for the good results. But, when there is a dwindling trend of fortunes, nobody will come forward; Those who are at the helm, may try to step down, and chose either to retire, or go in search of greener pastures.

Promoters , having tasted power all-the-days when they were at the steering, after leaving the Company, because of past attachments (Sanskrit and Telugu: "vAsanAs"), may want to drive their Companies from back seat. This type of approach, reflects a type of urge "to eat the cake and have it too", exercise some authority, without match responsibility.

REPORTED SHARE-HOLDING MIX

(Approx.) Shareholding Mix of Infosys
Top Promoters: 12.75%
Foreign Institutional Investors: 39%
Insurance Companies: 11%
Mutual Funds: 7%
Foreign Non-Institutions: 17%
Public: 10%

ybdonkey always believed

In India, Private Sector Companies are NOT REALLY PRIVATE SECTOR COMPANIES. In most Companies, Promoters hold very little share-holdings, often less than 20%. But, Promoters, and their benAmIes pull the strings in the Boards, hold most Executive positions, and draw huge amounts as perquisites/remuneration/salaries. Besides, they also ensure that their kith and kin, and the Companies promoted by them, get all the supply Contracts, Distributorships, sine cure jobs in the Company.

Independent Directors, Directors representing Financial Institutions such as Mutual Funds, Insurance Companies, Foreign Institutional Investors, do not take active interest in the Management of the Company. Even when they attend BOard Meetings, they just sign the Attendance, raise one or two unimportant questions and queries for formality and ritual sake, have the dinners/lunches/refreshments, collect the gifts, receive Sitting Fees, collect Flight Tickets, and leave. In Telugu language, there is a proverb: "SingaDu addanki pOnU pOyADu, rAnU vachchADu." Approx. English: A person named "SingaDu" went to a place called "Addanki" in Prakasham Dt., of Andhra Pradesh, and came back, with no outcome. Attending Board Meetings remains just a symbolic appearance.

"... The Board continues to address issues all stakeholders, including ones that the founders have, within the overall framework of the fiduciary responsibility it has to all shareholders. ...".

"...Board will treat the promoters just as it does 'any other shareholders' ...".

These words of the Chairman, seems to suggest that promoters will be shown their place, in proportion to their 12.75% shareholdings. If the (former) Promoters try to exercise their will on the Current Management, the Chairman may try to take shelter in the Foreign Institutional Investors who have 39% shareholding, apart from trying to get support from Mutual Funds and Insurance Companies.

Though SEBI seems to have started making some inquiries into the goings on, such enquiries seem to be too little, when a lot needs to be done.

To continue adding / deleting / editing. सशेष. ఇంకా ఉంది.

867 Pressurising Indian Public Sector Banks to reduce their lending rates does not appear to be proper

News: From 1-2-2017, State Bank of India, India's largest Bk., cut its marginal cost of funds-based lending rate (MCLR) across all tenors by 90 basis points (bps)., the steepest cut in several years. The six-month MCLR is now 7.95% and the three-year rate stands at 8.15%. PNB has cut its one-year MCLR rate by 0.7% to 8.45% from 9.15%. Union Bank of India has reduced its MCLR by 0.65-0.9% to 8.65%. The revised one-year MCLR stands at 8.65%. Link: Click here to go to Livemint.com, to study this Report. Indian Public Sector Banks seem to be under substantial pressure from Reserve Bank of India, Government of India-Ministry of Finance, to reduce their lending rates. Chair persons of Indian Public Sector Banks, though are supposed to be experts in Banking and Finance, though are supposed to act autonomously in consultation with their Boards, cannot really say anything, because their positions are precarious and at the mercy of our Rulers of India 2014-2019. Besides the Chairpersons have their own shortcomings and weaknesses, which place them in 'glass-houses' and the adage 'people in glass-houses cannot throw stones' comes to their mind. Persons can act with steadfastness and uprightness only when they are strong ethically and emotionally. Besides, most chairpersons of Public Sector Banks will be approaching their retirement age, and they may develop a thinking 'Anyway, we are going away. Why should we become unpopular with our bosses and the industrialists?'. Apart from that, their minds may be engaged on 'how to search for greener pastures. 'Which industrialist is going to appoint me in some sinecure job?' thus reverberates their inner-self.

SOME RELEVANT TELUGU PROVERBS/MAXIMS

1. tummitE UDe mukku. (A nose which gets severed and drops down, when a person sneezes. It will not last long anyway, because someday or other a person has to sneeze).

2.evariki puTTina biDDa, vekki vekki EDva. (When their own child dies, people sob and wail ceaselessly. When an orphan child dies nobody will weep. Purport: Nobody will show much concern, when the problem is not their personal.)

tinu, tina nivvu. (Eat and let others to eat. Purport: Live, and let live. This is a worldly wise advice. 21st Century additional meaning: Be corrupt, and allow others to become corrupt.

Additional inputs from ybrao-a-donkey, which are not intended to be imposed on Readers

1. Indian Public Sector Banks operate on a very slender spread (Difference between lending rate, and deposit interest rate = spread, that is their profit margin). This spread must remain consistent and stable, if Banks are to stay in existence, without becoming bankrupt.

2. Considering the very very low spread which the PSBs in India operate on, they will be constrained to reduce their deposit interest rates paid to public on Savings and Term Deposits, in proportion to the cuts they make in their lending rates. In India, public sector bank depositors are an unorganised lot. They do not and cannot form pressure groups, to press the Govt. and Banks to keep the deposit interest rates stable.

3. Deposit interest rates should not only compensate the Bank Depositors who lose the real value of their money owing to inflation, but also provide a reasonable return on their deposits. Aged persons live on income earned from their deposits with Public Sector Banks. Besides, they are forced to pay Income Tax on this meagre interest income on deposits, if the interest exceeds Rs. 10,000 p.a. That Rs. 10,000 was fixed at a time, when Rice was some Rs. 15 per kilo, but now the rice is Rs. 50 per kilogram.

4. The steep increase in deposits of Public Sector Banks after July 2016, is not owing to attractiveness or competitiveness of Public Sector Banks in the Market. It is by legal coercion. People had no alternative. Not only that. Post demonetization, people have lost their trust in the PROMISSORY NOTE GIVEN BY RBI, with RBI Governor's signature, "I promise to pay the bearer a sum of Rs. ...". Earlier, as far as currency note was concerned, Government was their Supreme God, and sometimes more than the Supreme God. Now, that confidence is shaken.

LIQUIDITY PREFERENCE THEORY OF INTEREST

5. Liquidity Preference Theory of Interest of the Economics Text Books, is operating now in full vigor. In spite of loss of confidence on the currency note, people are still queueing before bank counters and ATMs because, people want to take back their money from the Banks, and keep it at their homes, to meet transactions both foreseen and unforeseen. Apart from that, during the period 8th Nov. 2016 to 31st Dec. 2016, they have postponed some of their expenses, repayment obligations, which required liquid cash. Now, they have to meet all such commitments.

The liquidity preference of depositors was low earlier, when they had confidence in Banks and ATMs, the confidence of the type "Why should I draw cash and keep in home, exposing myself to thieves and robbers? Even at the last moment or one day prior to the event (e.g. marriage, funeral, house repair etc.) we can draw the amount." Now, that confidence has been replaced by an eagerness and wisdom to keep money at hand.

Small and Tiny businesses will keep all their currency notes at the homes of proprietors' and partners', and everyday they will carry cash to their shops. Reason: Once bitten twice shy.

Ques: There is some ambiguity in what you write. You are contradicting yourself. You say people have lost their confidence in currency notes. You also say that people will hold all their currency in homes.

Ans: No conflict or contradiction. You can visualise two situations:

TRANSACTIONAL DEMAND

Till substitutes develop as PAYMENT TOOLS (not necessarily digital, as per Rulers of India 2016's wishes), e.g. minuscule sized gold coins and silver coins (without Government emblems), without Rupees denomination printed on their face, their value determined on the basis of their weight mentioned on them, currency notes will have to be used for daily transactional demands.

GOVERNMENT CANNOT SEARCH EVERY HOME EVERY DAY

Once people decide what part of their money should be kept in 'cash-currency' to meet daily and short term transactional demand, they will keep that separately.

For the remaining surplus, they will not hold currency. Depending on the type of business/occupation/family conditions, the ratio between Cash & non-cash may be in the ratio of 20:80. People may part with the currency, in exchange for something which is slightly liquid, but which is more inflation-proof, and Government-proof. People may prefer to buy more gold and silver coin equivalent metal pieces as STORAGE OF VALUE, which Govts. cannot take away, by making speeches on TVs. In spite of numerous controls which Government may impose on Gold Dealers, parallel unorganized markets will develop. Richer people may purchase more Fire & Barglary Resistent safes (FBR Safes) and install small lockers at their own homes.

GAME OF DONGA - POLICE

External appearances of houses may become 'poor' and 'simple' so as not to attract to draw the attention of Income Tax Search Teams, roaming with metal detectors and scanners. There will be a technological race between the Government and the People, a game of 'donga-police' (Thief and Police in English). Who will play the thief? Who will play the police? Who will be onlookers? This will be the subject of our forthcoming blog posts.

To continue. सशेष. ఇంకా ఉంది.