Infy files settlement plea with Sebi over ex-CFO severance pay
Analysts say firm cleaning up act before new CEO takes over; regulator might take a year to decide
Infosys on Wednesday said it had approached market regulator, the Securities and Exchange Board of India (Sebi), to settle issues arising out of alleged disclosure lapses in the severance package paid to former chief financial officer (CFO) Rajiv Bansal.
The company, led by former chief executive officer (CEO) Vishal Sikka, had sanctioned the severance package of ~17.38 crore in October 2015. Bansal was sacked over differences with Sikka over the acquisition of Israeli technology firm Panaya for $200 million. Sikka had reportedly not taken approval of the nomination and remuneration committee (NRC) and the audit committee of the Infosys board before sanctioning the package, leading to questions on disclosure norms of the company.
This also prompted Infosys founder N R Narayana Murthy, along with others, accusing then chairman R Seshasayee for failing in governance norms and seeking his replacement. The public spat led to Sikka and Seshasayee quitting Infosys in August and the return of its co-founder Nandan Nilekani at the helm.
“The settlement application process is based on an undertaking that the applicant will neither admit nor deny the finding of fact or conclusion of law,” said Infosys in a regulatory filing to the BSE on Wednesday.
Analysts, however, have a different view. “The fact that Infosys has gone ahead with the settlement application to Sebi means that the company is admitting there were disclosure violations,” said Shriram Subramaniam, founder and managing director of InGovern, a proxy advisory firm in Bengaluru. “It also means that Infosys wants to put the ghost of the past behind ahead of its new CEO coming on board.”
Last week, Infosys said it had hired Salil R Parekh, a former executive of its global rival Capgemini, to be its second non-founder CEO and managing director. He will join Infosys in January next year. Legal experts said Sebi could take as long as a year to settle this case.
The regulator needs to look at the merit of the application before it sends it to the highpowered advisory committee (HPAC). The committee makes a recommendation to the Sebi board, of which two members will take a final decision. With the application to settle the issue with the market regulator, Infosys is looking to put an end to a two-year saga. It cut its annual forecast in October, citing slower business in the second half of the financial year.
Infosys, however, would continue to fight an arbitration case Bansal had initiated in April, after the firm stopped paying the former CFO part of the severance pay, said a company spokesperson. Bansal had invoked his rights to an arbitral tribunal, for which a former Supreme Court judge R V Raveendran is the arbitrator. Infosys had suspended payments after initially giving ~5 crore as part of the deal.
The deal with Bansal led to speculations that there could be wrongdoing in the acquisition, with an anonymous whistleblower writing to the Infosys board and market regulators calling for an investigation into the deal. Three independent panels gave clean chits to Sikka on the acquisition and the severance pay, but the firm did not disclose the full reports, citing that these contained sensitive and confidential information. Chairman Nilekani in October reviewed the findings gave a clean chit to Sikka, saying there was no wrongdoing, but declined to heed to Murthy’s request of making the probe reports public.