Sebi Examining Letter from Infy Whistleblower
Letter complained against CEO and board of directors
issues over severance payout to former CFO Rajiv Bansal and acquisition of Panaya
suggestions to take suo moto action on corporate governance issues raised by Infosys’ founders monitoring developments at Infosys and will seek a response from it on issues raised by the letter Mumbai: The Securities and Exchange Board of India is examining a recent letter from a whistleblower at Infosys complaining against the company’s CEO Vishal Sikka and the board of directors.
Sebi will seek a response from Infosys on several issues raised on the severance payout to former chief financial officer Rajiv Bansal and the acquisition of Panaya. “We will examine the response from the company on the letter Sebi has received and see if there is any violation of securities laws,” said a senior regulatory official. “We are closely monitoring the developments.”
The letter, marked to the Sebi chairman, says Bansal was a key management personnel (KMP) and any contract modification had to be approved by Infosys’ audit committee.
It alleges that Sikka agreed to a huge payout without any formal board approval, clearance from the audit and compensation committees or the shareholders. The letter also alleges that Bansal got 30 months’ salary though his contract stipulated a payout of only three months.
The letter said Sebi rules require transactions involving key management personnel to be disclosed as soon as they are entered into. Besides, the audit committee has to mention any reason for a non-arm’s length transaction. The board’s corporate governance report, given out on a quarterly basis, should have disclosed details of this transaction. The letter pointed out that the report for the said period did not mention any details of Bansal’s payout.
“The company takes any whistleblower complaint seriously and there is a due process to investigate any complaint that comes to us. If we do receive any query either directly or from the regulator, we will respond to it as per the due process,” an Infosys spokesperson said.
Infosys has been facing severe criticism since revealing in May 2016 the details of the severance payout to Bansal. The company said it would pay him Rs 17 crore, much more than stipulated in Bansal’s employment contract. The payment, unprecedented in Infosys history, is a significant part of founder NR Narayana Murthy’s claims that governance at the company has fallen.
While Infosys announced that Bansal was leaving in October 2015, the severance was only disclosed in May 2016. To be sure, Infosys eventually paid Bansal a little over .₹ 5 crore and suspended the rest of the payout after an outcry at its annual general body meeting.
Murthy, in an interview to ET, said the payout could have the appearance of ‘hush money’. Infosys has vigorously contested that characterisation.
“In the case of Bansal’s severance, due process was followed, necessary approvals were taken and disclosures were made. There was no impropriety or ‘hush money’ involved,” Roopa Kudva, independent director at Infosys, had told ET.
On Monday the company said it had learned from the incident and is creating a policy for severance. “There will be no more Rajiv Bansals,” chairman R Seshasayee said at the press conference.
The Panaya deal, which was the first acquisition by Infosys under Sikka, has also been questioned. ET has reported that Bansal was not in favour of the transaction. A senior former employee, privy to the Panaya developments, said the Israeli company was on the verge of shutting down, and a number of people were laid off before the buyout. Infosys paid six times Panaya’s revenue for the acquisition, as declared by Bansal to analysts in the earnings call at the time of the announcement.
Based on the response, Sebi will see if there has been any violation of securities laws