Infosys saga: Board knew of charges, but kept silent

Corporate governance standards of Infosys came into question again as the IT major, despite knowing about the whistle-blower complaints two weeks ago and discussing it during the October 11 board meeting, chose not to disclose it to investors.

Institutional investors, who hold over 50% stake in the company, and corporate governance firms have raised concerns over the company’s behaviour.

Also read — Infosys hires law firm to investigate charges on CEO

In a statement to stock exchanges on Tuesday, company chairman Nandan Nilekani said: “Post the Board Meeting of October 11, 2019, the Audit Committee began consultation with independent internal auditors (Ernst &Young) on terms of reference for their prima facie investigation.”

The statement makes it clear that despite being the “poster boy” of good governance in India, the company didn’t deem it fit to inform exchanges or its investors that they are investigating whether their revenues and net profit numbers are as they have been reported. An anonymous whistle-blower letter had alleged financial impropriety, racism, and misogyny by company CEO Salil Parekh, in cahoots with CFO Nilanjan Roy.

When DH sought a reply over the issue, the company declined to comment.

Though there is no regulatory requirement for the company to disclose whistle-blower complaints, experts opine that the company should have made a timely disclosure to investors given the gravity of the allegations.

Also read — Infosys shares tank over financial fudging allegations

“The company could have made appropriate disclosures on the results day itself. The gravity of these complaints merited urgent action and timely disclosure to investors,” said Shriram Subramanian, founder of InGovern Research Services. Two institutional investors, who have large stakes in the company, said the company’s non-disclosure is a cause for worry.

“There are only two probabilities here: either the company is confident that it’s clean or there has been fudging of numbers, which is why they hid it during the quarterly results,” an executive from one of the fund houses told DH.

Also read — Whistleblowers sting Infosys; ADRs tank

Infosys is having an analysts day on November 6, where it is expected to be questioned by analysts tracking the sector.

As the company tried to gloss over the charges in its quarterly results earlier this month, sources suggest that the disillusioned whistle-blower group decided to leak the letter to select media houses.

Also, till the letter was made public on Monday, the company had decided to conduct only an internal investigation into the matter. It was only after the media reported the alleged lapses did the company decide to hire an independent law firm.

Also read — Infosys CEO Parekh faces financial fudging allegations

This is not the first time that the company is facing questions over its disclosure process. After independent auditors gave the company’s erstwhile management a clean chit in the controversial acquisition of Israeli firm Panaya, the company decided not to make the full investigative report public — much to the disappointment of the company’s co-founder N R Narayana Murthy.