SHAREHOLDER ACTIVISM

Infosys founder and former chairman N R Narayana Murthy is all set to lay his cards on the table on his recent allegations about possible corruption at Infosys at a conference call with investors today at 6:30 PM. UPDATE: Murthy's call has been reportedly postponed to next week. The call comes five days after Infosys CEO Vishal Sikka resigned, alleging the constant nagging from certain quarters had made it impossible for him to focus on his job of leading the more than 2 lakh Infosys employees. Reacting to the event on the same day, Murthy had characterized the allegations made by Sikka as baseless and said it was "beneath his dignity" to reply to some of them. However, he also promised that he would "reply to these allegations in right manner, forum & at appropriate time." That time seems to be today at 6:30 PM and the forum seems to be a conference call that Murthy has called for Infosys investors. CORRUPTION ALLEGATIONS Murthy's allegations primarily stem around the acquisition of Israeli cloud computing firm Panaya in 2015. There were allegations that someone at Infosys may have financial benefited from the deal. "Can the company categorically deny that any employee and /or his / her relative benefitted personally in the Panaya acquisition," Murthy asked. "Can the company certify with data that the said acquisition was not overvalued as alleged by the whistle blower? If the answer to question 2a is YES, then can the company provide the names of Panaya investors related to Infosys employees with the nature of their relationship to the Infosys employee and the number of shares they held on the date that Panaya was acquired by Infosys?" The spat has divided investors and observers into two camps -- those who believe that Murthy is having problems 'letting go' of a company he was used to controlling, and those who believe that the allegations by the whistleblower, picked up by Murthy, require a more thorough rebuttal from the company. Most of the key founders have stood by Murthy's side. The company responded to the allegations by ordering a probe by an outside agency, the results of which were never made public -- something that Murthy picked on. "My favorite adage is: When in doubt, disclose. For some strange reason, even my later request to disclose the details of the investigation was not accepted," said Murthy in a letter last week. "Several shareholders who have read the whistle-blower complaint have told me that it is hard to believe a report produced by a set of lawyers hired by a set of accused, such a report giving a clean chit to the accused, and the accused refusing to disclose why they got a clean chit! They say that this is a joke by any governance standard and it is not the way an impartial and objective investigation by a company like Infosys should be held. "Further, these shareholders wonder if this worrisome attitude of the current Infosys board is accepted now, then what prevents a future Chair of the board, or the Chair of the Audit Committee, or even a future CEO to commit a huge fraud, appoint a lawyer, get a clean chit, refuse to release the details of the investigation, and say everything is fine," Murthy asked in a statement on the day. He also rejected the Board's argument that it cannot release the findings of the report as it would encroach on the privacy of the shareholders of Panaya and others involved in the deal. "It would be proper for the board to put all the three investigation reports (Cyril Amarchand Mangaldas (CAM) Report, Latham and Watkins (LW) Report and Gibson, Dunn and Crutcher (GDC) Report) and the Panaya valuation report on the website of the company, and also provide a pointby-point denial of the whistle-blower accusations fully supported by data and facts. The whistle-blower has made serious allegations and just a toplevel press release is not sufficient. The company should provide answers to the following questions emanating from the whistle-blower accusations... "Even if the company does not want to release any of these reports, what prevents the board from answering my questions which are purely based on the whistle-blower accusations and which will, once and for all, clear the air about the special treatment shown to (ex Infosys CFO) Mr. Rajiv Bansal and Mr. David Kennedy? Does not the board owe to the shareholders full and detailed answers to accusations by a whistle-blower that involve the entire board and the senior management? "After all, board members are the representatives of the shareholders. Under what SEBI’s and SEC’s statute can the board refuse information to shareholders? Under what law can Mr. Seshasayee and the current board refuse to answer the questions of a shareholder? What governance model is this? Please enlighten me." "The most worrisome aspect of the whistle-blower accusation is his or her claim that there was an e-mail sent by Mr. David Kennedy to Dr. Vishal Sikka that Mr. Kennedy could not hide the Bansal agreement from the board and the CFO any longer. It is best that the company scotches this accusation either by denying the existence of such an e-mail with proof and clearing the names of both Mr. Kennedy and Dr. Sikka, or by explaining to the shareholders what action was taken against the individuals who hid information from the board and from the new CFO who signs the SOX statement," he added. To read the full letter from Narayana Murthy, you can click this link. NARAYANA-MURTHY-LETTER-ALLEGATION-INFOSYS

Tag: SHAREHOLDER ACTIVISM

Narayana Murthy to clarify his stand on Infosys allegations, Vishal Sikka today