Another year. Another CEO. Another scandal. Infosys is facing allegations of serious impropriety for the second time in as many years. The Bengaluru-headquartered software company told exchanges that it had taken cognizance of a lawsuit filed against it in the United States by Rosen Law Firm.
The lawsuit is based on complaints by anonymous sources within the company. The allegations, though unproven, shaved USD 7 billion off the company’s market value in a single day – Infosys’ stock fell by 16 per cent since the letter penned by employees was made public.
On September 20, a whistleblower group that identifies itself as “Ethical Employees” wrote to Infosys’ Board of Directors and the United States Securities and Exchange Commission (SEC) alleging that C-suite executives including CEO Salil Parekh and CFO Nilanjan Roy were fudging the company’s financials to artificially shore up profits in the short term.
“He (Parekh) directs them (employees) to make wrong assumptions to show margins… In the last quarter, we were asked not to fully recognise the costs like visa costs,” the letter reportedly says. It further states that Parekh made racist comments against members of the board. “The company intends to defend itself vigorously in such a lawsuit,” said Infosys in a statement to exchanges.
This is not the first time that whistleblower complaints have rocked the boat at Asia’s second-largest software firm. In 2017, allegations of financial malfeasance surfaced regarding the acquisition of Israeli software firm Panaya. Infosys co-founder N.R. Narayana Murthy intervened to address the perception that the company had strayed from its ideological moorings. Vishal Sikka, who was at the helm, stepped down, citing “personal attacks” and a “continuous drumbeat of distractions.”
U.B. Pravin Rao was made interim CEO. The board tapped Salil Parekh to take over the reins. Parekh was appointed the CEO and MD on December 2, 2017. But allegations of corporate governance have not gone away. And the latest chapter in the enduring saga could prove to be the most damning.
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A whistleblower group accused Infy CEO Salil Parekh (R) and CFO Nilanjan Roy (L) of fudging the company’s financials to artificially shore up profits in the short term. The U.S. SEC is probing the allegations as the lawsuit was filed in a New York court. India’s market regulator, the Securities and Exchange Board of India (SEBI) has initiated an investigation into the complaint and has requested additional information from the company.
Whistleblower allegations have, in the past, taken a toll on employee morale, and also invited punitive action from regulators. Infosys’ attrition rate stood at 21.7 per cent in the September quarter of 2019. TCS reported 11.6 per cent attrition for the corresponding period.
Previous run-ins with regulatory authorities have cost Infosys dearly. The company paid USD 34 million to settle a US investigation pertaining to irregularities in visa applications and abuse of immigration processes. Here’s a timeline of events outlining Infosys’ handling of whistleblower complaints in recent years.
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August 2014: Vishal Sikka takes over from S.D. Shibulal as the CEO of Infosys, becoming the first non-founder to occupy the corner office. Sikka was previously CTO at German software major SAP.
February 2017: A whistleblower alleges irregularities in the company’s USD 200-million acquisition of Israeli automation company Panaya. Co-founder N.R. Narayana Murthy questions the board’s decisions, implicitly equating the inordinately high severance paid to former CFO Rajiv Bansal with “hush money.”
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Bansal was paid Rs. 17.4 crore (USD 2.7 million) upon quitting his job in October 2015. The coterie of founders made public their disaffection with corporate governance practices at the company, notably Sikka’s sizeable compensation and the hefty severance packages afforded to Bansal and the then chief compliance officer, David Kennedy.
Vishal Sikka was the first non-founder to take up the corner office at Infosys in 2014. August 2017: The board rebuts Murthy’s claims, and in a statement to shareholders, makes the counterclaim that “Mr. Murthy’s campaign against the Board and the Company has had the unfortunate effect to undermine the Company’s efforts to transform itself.”
Vishal Sikka quits, citing the machinations undertaken by the founders to undermine the actions of the board. The board chairman R. Seshasayee, along with independent directors John Etchemendy and Jeffrey Lehman resign. Nandan Nilekani, an old hand, is appointed non-executive chairman.
October 2017: Internal and external inquiries unanimously clear Sikka of misconduct. Previously, the law firm Gibson, Dunn & Crutcher had concluded that there was no incriminating evidence to suggest that Sikka or any other employee of Infosys had profited from the acquisition of Panaya in 2015.
December 2017: Salil Parekh is named the next CEO of Infosys. He was previously a member of the group management board of Capgemini.
January 2018: Salil Parekh formally takes charge as CEO on January 2, 2018, marking the end of a prolonged standoff between the board and the founders.
April 2018: The board decides to place Panaya and Skava on the block. Infosys had paid around USD 200 million for Panaya and USD 120 million for Skava. Both companies were acquired in 2015 when Sikka was the CEO. Infosys finds that in the space of three years, both companies are now “value-less.”
A whistleblower pens a letter to regulators in India and the United States, picking holes in the economic rationale behind buying the two companies, and then wanting to sell them at a knockdown price.
After Vishal Sikka quit in 2017, Nandan Nilekani (in pic) was appointed non-executive chairman. May 2018: After a strong start to his second innings at Infosys, Nilekani finds himself batting on a sticky wicket. Another whistleblower missive to the SEC and SEBI claims that Nilekani, in his capacity as non-executive chairman, is “conniving with the current board to quietly bury all the wrongdoings of the earlier board.”
October 2019: A group of employees who identify themselves as “Ethical Employees” write to the Infosys board and the SEC alleging that CEO Salil Parekh engaged in accounting malpractice to inflate profits. Nilekani confirms that a board member had received two anonymous letters in September – one titled ‘Disturbing Unethical Practices’, and another, ‘Whistleblower Complaint’.
He says both were placed before the audit committee on October 10. When asked by the SEBI and BSE as to why these allegations were brought to their notice by the company, it says that the audit committee was reviewing the “generalized allegation” made in the complaint, and that disclosure was not required at that stage.
The company ropes in the law firm Shardul Amarchand Mangaldas & Co to conduct an independent investigation. Infosys issues a statement saying the case will be treated on its merits and in accordance with the company’s whistleblower policy. Infosys shares fall.
Shareholder wealth rose 23.45 percent under Parekh’s stewardship. The veracity of the whistleblower complaint is being investigated.
Patience, Perseverance, Passion: What School & Life Taught Mukesh Ambani, Narayana Murthy
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"Education is not the filling of a pail, but the lighting of a fire." - William Butler Yeats
Teachers form an integral part of one’s life, mentoring and shaping up minds in an environment away from home.. From inculcating the right values to nurturing the spirit of inquiry and truth, teachers, in schools, colleges and universities, have often been the guiding force behind many success stories.
On Teacher’s Day, that marks the birth anniversary of Sarvepalli Radhakrishnan, we take a look at the almae matres of some of the leading names in India’s business world that have helped shape their life and thinking.
In Pic: Mukesh Ambani (left) and Narayana Murthy (right)
"Education is not the filling of a pail, but the lighting of a fire." - William Butler Yeats
Teachers form an integral part of one’s life, mentoring and shaping up minds in an environment away f..
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The Mahindra & Mahindra chairman spent his early years at a boarding school in Ooty, Tamil Nadu, completing his primary education from The Lawrence School, Lovedale - where he reportedly even learnt weaving, picking it over woodwork. The then-young Mahindra didn’t aim to join the business world, and rather wanted to pursue film-making.
A part of his love for cinema came from accompanying his mother, Indira, to movie premieres.In addition to being a college history teacher, she was also an actor before she got married.
Having finished school, he joined the Sir J. J. College of Architecture, but the college went on strike and he left for foreign shores majoring in Visual and Environmental Studies at Harvard, which covered various disciplines including film, photography and art.
But life had other plans, and he had to forgo dreams of joining the entertainment industry.
He went on to follow in his father’s footsteps, completing his MBA from Harvard Business School in 1981, before joining the family business.
But while the dream and career path changed for the 64-year-old India Inc boss, the one thing that has remained constant over the years is his dedication towards the cause of education. The Group, through its philanthropic arm, the KC Mahindra Trust, focuses on promoting literacy, operating several vocational schools, the Mahindra United World College, and also offering grants and scholarships. The group’s Nanhi Kali project also works towards the education of young girls in the country.
The Mahindra & Mahindra chairman spent his early years at a boarding school in Ooty, Tamil Nadu, completing his primary education from The Lawrence School, Lovedale - where he reportedly even learnt ..
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Nagavara Ramarao Narayana Murthy, popularly known just as Narayana Murthy, was born in Sidlaghatta, Karnataka where he grew up attending a government school.
After completing his school education, he enrolled in the National Institute of Engineering and graduated with a degree in electrical engineering in 1967. With a passion to always do better, he went on to earn his Master's degree from the Indian Institute of Technology in Kanpur in 1969.
Education has always been close to the septuagenarian's heart; and he has served as a member on the boards of various institutions including Cornell University, Wharton School, the Graduate School of Business at Stanford University and the Rhodes Trust at Oxford. The Infosys boss was also the Chairman of the Indian Institute of Management in Ahmedabad - which is also the place where he began his career as the chief systems programmer.
Nagavara Ramarao Narayana Murthy, popularly known just as Narayana Murthy, was born in Sidlaghatta, Karnataka where he grew up attending a government school.After completing his school education, he ..
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The Chairperson & Managing Director of Biocon Limited Kiran Mazumdar-Shaw grew-up attending the Bishop Cotton Girls High School in what was then Bangalore.The top boss spent a major part of her education years in the IT city, where she also attended Bangalore University, earning a bachelor’s degree in science (Zoology Hons.).
Mazumdar - who has been named among TIME magazine’s 100 most influential people in the world - completed her Master’s in malting and brewing from Ballarat College, Melbourne University.
The Chairperson & Managing Director of Biocon Limited Kiran Mazumdar-Shaw grew-up attending the Bishop Cotton Girls High School in what was then Bangalore.The top boss spent a major part of her educa..
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One of the richest people in the world, Reliance Industries chairman Mukesh Ambani was once just another student at Mumbai’s Hill Grange High School located at Peddar Road. As a young school-going boy, Ambani was accompanied by his younger brother Anil and now-close friend Anand Jain.
The business tycoon went on to study engineering, completing his BE in Chemical Engineering from the Institute of Chemical Technology (UDCT), Matunga in Mumbai. He later enrolled for an MBA at Stanford University but dropped out to join a then-growing Reliance.
Though the 62-year-old had to leave his degree mid-way, daughter Isha followed in his footsteps, completing her Master of Business Administration (MBA) from the Stanford Business School last year.
Not just in her father’s footsteps, the RIL heiress also took a page out of her mother Nita’s notebook and took up a teaching job at the Stanford nursery. Nita Ambani, who was a teacher before she got married, has been a staunch advocate of education and has founded, and runs the Dhirubhai Ambani International School in Mumbai.
One of the richest people in the world, Reliance Industries chairman Mukesh Ambani was once just another student at Mumbai’s Hill Grange High School located at Peddar Road. As a young school-going bo..
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Azim Premji, born on July 24, 1945 in then-Bombay, packed his bags for Stanford University after completing his schooling in the country. But all didn't go as per plan, and the 74-year-old had to cut short an engineering course at the university, and return to India to pick up the family baton after his father’s death in 1966.
Azim Premji, born on July 24, 1945 in then-Bombay, packed his bags for Stanford University after completing his schooling in the country. But all didn't go as per plan, and the 74-year-old had to cu..
