Infosys (INFY) Tops Governance List: Honor or Scam?

I was delighted to see that one of the stocks in my portfolio, Infosys ($INFY), has been ranked #1 in corporate governance by IR Global Rankings (“IRGR”). (Infosys is number one for corporate governance practices: IR Global Rankings, The Economic Times, 12/13/2012) That sounds like quite an achievement. Unfortunately, when I tried to find more about the basis of the award, I couldn’t really verify the assessment. From what I know, Infosys has better corporate governance than most, but is it really the best?

IRGR claims to have

the most comprehensive ranking system for investor relations websites, online annual report, corporate governance practices and financial disclosure procedures. The ranking is based on extensive technical proprietary research of publicly traded companies through a clear and transparent methodology and is supported by key global institutions such as Arnold & Porter; KPMG; MZ and Sodali.

The evaluations are executed by a team of experienced investor relations professionals and are reviewed by independent audit and legal experts. The IR Global Rankings provides a unique and value-added external review of a company’s communication process with analysts and investors worldwide and all participants can choose to receive an individual feedback with the key findings.

Since rankings are based on “proprietary research,” we can’t verify the worthiness of the ranking. At least it is good to know the companies are “by a team of experienced investor relations professionals,” rather than by company responses to a survey or something. Wait, on the IRGR site I see,

The evaluations for the Corporate Governance ranking are based solely on the responses provided by each participant on a specific corporate governance questionnaire elaborated by IR Global Rankings which is aimed at identifying which companies have the best corporate governance policies. However, neither IR Global Rankings nor any of its supporting entities are liable for the accuracy of the answers provided nor for the execution or not of such corporate governance policies and we do not conduct any sort of auditing of the answers provided.

 It appears IRGR may have simply sent out a check-box survey of what it considers to be best practices. Is it check all the boxes and win? I really can’t tell. Elsewhere IRGR touts its transparency: “evaluation criteria and results are available on the IRGR website.”  Unfortunately, I couldn’t find the evaluation criteria described. I get the feeling IRGR may be like all those “you’ve been nominated to Who’s Who” e-mails I keep getting in the mail from people who think I’ll pay for a book listing my name with a lot of other minor luminaries.
From what I know, Infosys has an independent but staggered board elected for five years. Independent directors are limited to serving only nine years and must retire at age 70. I’m not sure how they set the CEO’s pay but their pay is certainly less outrageous than many in the US. Best corporate governance? Hard to tell… certainly better than most companies I know of in India and better than a great many American firms.

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