Bengaluru: Infosys Ltd has filed a consent plea with capital markets regulator Securities and Exchange Board of India (Sebi), regarding an ongoing probe by the regulator related to the company’s decision to give a generous severance payment to its former chief financial officer (CFO) Rajiv Bansal, a move that had drawn the ire of some proxy advisory companies as well as experts.
On Wednesday, Infosys in a notice to exchanges said that the company had submitted a settlement agreement based on an undertaking that it would neither admit nor deny the findings of the regulator’s investigation.
Infosys said the company wants to resolve allegations that it failed to seek prior and separate approval of the Nomination and Remuneration Committee and the Audit Committee, in relation to the severance agreement signed with Bansal.
“The settlement application process is based on an undertaking that the applicant will ‘neither admit nor deny the finding of fact or conclusion of law’," Infosys said in the filing.
“Through the settlement process, the company wants to resolve allegations relating to the company not seeking prior and separate approval of the nomination and remuneration committee (NRC) and the audit committee, in relation to the severance agreement entered into with the former CFO."
Infosys said it would provide an update on the settlement “upon conclusion of the confidential settlement process".
Proxy advisory firms and experts expressed unhappiness on three issues regarding the latest disclosure by Infosys.
First, Infosys until now has failed to disclose to the stock exchange or investors with regards to any ongoing investigation by Sebi.
Rather, all this while, the company has merely said that it has answered questions the market regulator has asked the firm.
“The company is sort of trying to bury the ghost of the past by settling with the regulators," said Shriram Subramanian, founder and managing director of proxy advisory and corporate governance firm InGovern Research Services.
“Now, it is to be asked why Infosys did not make a disclosure if at all Sebi was conducting some investigation."
Second, Infosys seeking a settlement with the market regulator once again raises questions if the company admits to wrongdoing in the board’s decision to award Rs17.38 crore in severance to its former CFO Bansal in October 2015.
“This means that Infosys feels there has been no proper disclosure to the NRC. This is probably the first case where a company has been found to have had lack of proper information between the board, Nomination and Remuneration Committee, and the management. It will be a path-breaking case," said J.N. Gupta, managing director and co-founder of Stakeholder Empowerment Services (SES), a proxy advisory firm.
“Some lapses have already been admitted by the company but this development suggests that there is some more dimension to the case, details of which we don’t know or rather which we will not get to know. It is now up to the shareholders to question the board and ask for details of what the settlement is all about, because the regulator cannot enforce on the company to disclose these details."
Third, Infosys named independent director D. Sundaram as the new chairperson of the audit committee in October, replacing Roopa Kudva. Executives have questioned why the company appointed a new head of for audit committee if there had been no wrongdoing.
“Infosys has still not explained why it has changed the head of the audit committee. Now, the question that needs to be answered is if this change was made because the company admits to some lapse made, while the board agreed to give severance to Rajiv Bansal," said the executive cited above.
An Infosys spokeswoman said the company had nothing further to add in response to Mint’s queries on Wednesday.
Infosys had agreed to pay Bansal a severance amount of Rs17.38 crore or 24 months of salary, but the company suspended payments after paying Rs5 crore, when the company’s founders led by N.R. Narayana Murthy raised a furore about the size of the severance package, questioning whether it was “hush money" designed to cover up any wrongdoing on the part of Infosys. Seshasayee, who stepped down from the Infosys board in August, has repeatedly denied allegations of wrongdoing.
Since then, Bansal has initiated arbitration proceedings against Infosys to recover the remainder of the payout that had been initially promised to him by the previous board of Infosys, led by Seshasayee.