Bengaluru: Infosys Ltd’s board did not record the proceedings of a 12 October 2015 meeting where it discussed paying Rs17.38 crore in severance pay to former chief financial officer Rajiv Bansal, said an executive familiar with the development.
The omission again raises doubts on decision-making by the board of India’s second largest services firm, which has just emerged from a tussle with founders led by N.R. Narayana Murthy over corporate governance issues, including the payment to Bansal and a 55% increase in CEO Vishal Sikka’s pay to $11 million a year in 2016.
Infosys’s board only put this payment on record or “minuted" the discussion when it met on 14 January 2016, when the company announced its fiscal third-quarter earnings, the executive cited above said on condition of anonymity.
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This could possibly be one reason which peeved Murthy, who questioned the unexplained and generous payment and publicly lashed out at the board. In published remarks, Murthy even questioned whether severance payments were being made as “hush money" to suppress “some information harmful to the company". On Monday, non-executive chairman R. Seshasayee denied the allegation, which he said was “disturbing".
“All decisions taken by the board must be documented at the appropriate time. If indeed true, it is surprising for a company like Infosys to not have maintained comprehensive and complete minutes," said Hetal Dalal, chief operating officer, Institutional Investor Advisory Services, a proxy advisory firm. “While we believe the amount of severance pay is not material in the context of Infosys’s size, the transaction—and the disclosures around it—could have been handled significantly better."
Significantly, Sikka gave his nod to the separation agreement, which was subsequently approved by the board after it was justified by Infosys’s chief compliance officer David Kennedy, according to two executives, including one board member and the person cited in the first instance. The board member also requested anonymity.
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Kennedy convinced the board’s nomination and remuneration panel that the management had negotiated “well" to bring down the severance to two years’ salary as against the compensation for three years demanded by Bansal, who was represented by his law firm AZB Partners, according to the board member cited above.
An email sent to AZB Partners seeking comment went unanswered.
An email sent to Murthy seeking comment was also unanswered.
Surprisingly, Infosys believes that the question of putting on record Bansal’s severance payment is a “housekeeping" issue and not a cause for concern.
“The board had a call, we discussed and we approved (Bansal’s severance). The fact that some housekeeping issues, recording took place at a later date, to my mind should not cause any concern of anxiety to someone outside the company," said Seshasayee.
“These are things which to my mind happen to many companies. Look we need to tighten the processes of recording... but these are internal issues which we will attend (to), and we have done subsequently," he added.
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Calls and text messages to Bansal seeking comment went unanswered.
“Vishal and Rajiv were not comfortable working together," said the board member. “So Vishal wanted Bansal to leave. The management negotiated his severance and it was Vishal who actually signed off on the agreement. Later the agreement was brought before us by David Kennedy."
Sikka, in an interaction with the media on Monday, explained Bansal’s departure as an outcome of “team chemistry issues". Mint could not independently ascertain the reasons for the purported differences between Sikka and Bansal.
“(We were told) management had negotiated well to lower it to two years of salary, and Kennedy also justified (it) by saying paying severance money is well within acceptable standards," said the board member cited above.
Kennedy was sacked by Infosys in December last year, and proxy advisory firms again questioned the rationale of the company offering him $868,250 (around Rs5.8 crore) in severance.
Infosys then said that Kennedy and the company mutually agreed to part ways but clarified that severance pay was part of Kennedy’s employment agreement when he joined in November 2014.
An email sent to Kennedy seeking comment went unanswered.
Mint first wrote about Infosys making a severance payment to Bansal in May last year, when the company disclosed it paid Rs23.08 crore in severance pay, salary and other benefits to Bansal in a footnote to its annual report, which then made a few equity analysts and proxy advisory firms question corporate governance at the company.
In June, at Infosys’s annual general meeting, Seshasayee disclosed that Rs17.38 crore in severance pay was to be paid over 10 instalments, of which two instalments had already been paid by then. Infosys for now has paid Rs5.2 crore in severance to Bansal, Seshasayee said on Monday.