Corporate governance lapses continue to haunt Infosys

Infosys, the 'poster boy' of best corporate governance practices in India, has been in the news once again for lapses with a new controversy coming to the fore.

A month-old letter by an anonymous whistleblower group, which was leaked to select media houses on Monday, alleged fudging of financial statements, racism, and misogyny by the company's CEO & MD Salil Parekh. The letter alleged that Parekh, other than inflating profits and revenue, has been foregoing due diligence in signing large deals. The letter also alleged that the company's chief financial officer Nilanjan Roy has been hand in glove with Parekh in fudging accounts. It is alleged that Parekh made racist and misogynistic comments against the board members. In fact, as soon as Roy as CFO of the company stopped reporting the gross hiring numbers every quarter.

This is not the first time the IT major has landed in a controversy regarding corporate governance. Many tracking Infosys from its early days would be aware of Phaneesh Murthy, who served as a Director of Infosys and Infosys BPO Ltd, was the first to land the company into controversy.

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He was fired from Infosys in 2002 after the company settled a case of sexual harassment against him, reportedly for $3 million.

In September last year, Infosys lost an arbitration case over severance package to its former CFO Rajiv Bansal. The software major was asked to pay an outstanding amount of Rs 12.17 crore, with interest.

Bansal quit in October 2015, following differences with the management over the acquisition of Panaya, an Israeli automation software firm. Infosys had initially agreed to pay him a severance package of Rs 17.38 crore or 24 months of salary, but the company suspended payments after he was paid Rs 5 crore. This was following objections from Infosys co-founder N R Narayana Murthy and a former board member Mohandas Pai.

The Panaya buyout was one the main flashpoint in the corporate governance battle between the erstwhile board, which included CEO Vishal Sikka and chairman R Seshasayee, and Murthy. The other flashpoint between Sikka and Murthy was the high compensation drawn by the former. Questions were raised on conflict of interest in the buyout and whether the company had overpaid in the deal. Sikka resigned from Infosys in August 2017. A couple of days later, Seshasayee also quit the company.

As the company battled the crisis, the co-founder Nandan Nilekani returned to the company in the capacity of chairman of the board. After taking charge of the company, Nilekani had said: “I want to make Infosys a boring company once more”. In hindsight, after Monday’s episode, it seems that Nilekani hasn’t been successful in his ‘main motive’.