Whistleblower complaints, lapses in corporate governance and internal conflicts are not new to Asia’s second largest IT-services firm Infosys Ltd. An anonymous employees’ group has accused the management, mainly chief executive Salil Parekh and chief financial officer Nilanjan Roy, of unethical accounting practices. Similar issues had unfolded nearly three years ago when the company’s promoters had blamed the board including former CEO Vishal Sikka for misgovernance.
Tension between the then management and founding promoters had mounted after whistleblower complaints made various allegations ranging from the $200 million acquisition of Israeli automation company Panaya in February 2015 being overvalued to top executives having personal interests in the acquisition. Large severance packages of former chief financial officer (CFO) Rajiv Bansal and former chief legal officer David Kennedy and a 55% hike in Sikka’s compensation had heightened the conflict.
Here is a timeline of the events that took place in 2016 and 2017 at Infosys:
August 2017: CEO Vishal Sikka resigns, ending a prolonged rift between the company’s board and promoter shareholders led by N.R. Narayana Murthy over issues of poor governance practices.
July: In an email to the board, Murthy asks if the company could categorically say that no employee or a relative of the employee benefited from Infosys’ decision to spend $200 million to buy Panaya.
June: Law firm Gibson, Dunn & Crutcher submits a report to the board concluding that there was no evidence of any Infosys executive profiting from the decision to buy Panaya in February 2015.
April: Infosys names Ravi Venkatesan as co-chairman and appoints a three-member panel to advise Sikka. This made Sikka unhappy as he had a tough working relationship with Venkatesan on the board.
February: Non-executive chairman R. Seshasayee says there is no conflict of interest between the founders and the board. Sikka clarifies that talks in the media on concerns over corporate governance were “distracting" and that he has good relations with the founders including Murthy.
February: Murthy reportedly calls off fight with the board, saying the company will resolve issues of corporate governance. Murthy in an interview to the Economic Times says large financial deals given to exiting senior employees “raise doubts whether the company is using such payments as hush money to hide something". He also speaks of “a concerning drop in governance standards at Infosys".
January: Board inducts independent director D.N. Prahlad into the nomination and remuneration committee (NRC) that oversees the nomination process, incentives and pay offered to its senior executives, even the CEO. Prahlad, a relative of Murthy, is one of the five members of the NRC.
December 2016: Founders including Murthy, S.D. Shibulal and Kris Gopalakrishnan have a meeting with Seshasayee and Sikka. The founders expressed their concerns over corporate governance issues.
October: Infosys appoints D.N. Prahlad, a former employee, as an independent director on the company’s board. The appointment did not go down well with proxy advisory firms.
September: Infosys discontinues remaining installments of severance payment of ₹17.38 crore to former CFO Rajiv Bansal after some of the company’s founders express unhappiness.
May: Infosys pays ₹23.02 crore as severance, pay, salary and other benefits to former CFO Bansal, drawing criticism for awarding an unusually high compensation to an outgoing executive.
April: Only 23.57% of promoter votes cast in favour of a resolution reappointing Sikka as the chief executive of Infosys. He is the first non-founder CEO of Infosys appointed in 2014 for a five-year term.
February: Infosys board decides to reward Sikka with a 55% rise in compensation package to $11 million, making the founder promoters extremely discontent with the decision.