Infosys again

With a new CEO in Salil S Parekh and with co-founder Nandan Nilekani at the helm as chairman it appeared as if the $11-billion Infosys had finally put behind the controversies that had dogged it the last couple of years. Sadly, that seems to have been a false hope. Even before Parekh could assume office, the twin ghosts of the Panaya acquisition and the severance package of former CFO Rajiv Bansal have come back to haunt the company. The whistleblower who first brought the two issues into the open has called for the prosecution of the Infosys management and board after the company filed a consent plea with market regulator SEBI on the latter’s ongoing probe over the severance package. Another former CFO, V Balakrishnan, has called for the resignation of former co-chairman, Ravi Venkatesan, and Roopa Kudva from the board and called for its overhaul with positions to be filled with people of “high integrity and stature”. In short, it’s back to square one for the beleaguered company and its investors.

This is not how it should be. The new board had given a clean chit to the Panaya acquisition in October and Nilekani went on record to say that his review of the deal showed that the conclusions drawn by the independent investigators were correct. He also clarified that the company had made appropriate disclosures on the Bansal severance package at the end of the relevant quarter. Normally, this should have been the end of the matter. What’s resurrected the issue again is Infosys’ decision to file a consent plea with SEBI, following a show-cause notice issued by the latter.

A consent plea is a legitimate mechanism available under the securities laws of the country for an entity under regulatory probe to settle the issue without admission of guilt. Infosys’ application to SEBI says that it will “neither admit nor deny the finding of fact or conclusion of law”. The reasoning is clear: two independent investigations have found no wrongdoing and a reconstituted board has upheld the findings. Therefore, continuation of the regulatory probe will not only be a waste of time and resources for the company but also divert its focus from the business. From the company’s viewpoint this is a pragmatic move that will allow it to concentrate on the challenges in its business. It is singularly unfortunate, therefore, that the whistleblower has once again raked up the issue. By persisting with his approach, the whistleblower, however good his original intentions were, now runs the risk of being seen as someone with an agenda to oust certain members from the board. The regulator should go ahead and deal with Infosys’ consent plea on merit without being distracted by the fresh developments. Infosys, by virtue of being the second largest IT company in India, is systemically important and cannot be put through the wringer all over again, and without basis at that.

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