India’s second-largest IT service company Infosys has approached capital market regulator SEBI (Securities and Exchange Board of India) in order to settle allegations of disclosure failures with regard to high severance package offered the former CFO Rajiv Bansal. However, Infosys has clarified in its settlement plea that it is not admitting to a wrongdoing in allegedly failing to disclose the severance package agreement. “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,” Infosys said in an exchange filing on Wednesday.
Further, any settlement with SEBI in this regard also doesn’t necessarily mean a settlement with Rajiv Bansal himself, to whom the full payment still remains suspended. Infosys is facing questions on failing to disclose Rajiv Bansal’s severance package worth Rs 17.38 crore to the remuneration committee, audit committee, stock exchanges and regulators. The concerns over disclosure failure arose when the founder N R Narayana Murthy raised the matter with the management and in the press last year and through this year, leading to an ugly public spat with the then MD and CEO Vishal Sikka.
Why Infosys made the first move to settle allegations
As one dispute between Infosys and Rajiv Bansal is already underway after the company halted the payment of the remaining amount of money to him, the firm apparently wants to have a clean slate before its new CEO Salil Parekh joins in, analysts have said. “This is probably to pre-empt any class action lawsuits without admitting or denying guilt,” Sandeep Parekh of Finsec Law Advisors told ET Now in an interview.
Infosys now wants to proceed ahead without caution from SEBI, avoiding any possible class action law suite or any anti-disclosure probe against it. In this sense, the proposed settlement assumes importance as “there would not be triggering of any class action lawsuit because in the US class actions are very often fishing expedition,” Sandeep Parekh said. “They do not have much at hand but if they get hold of even a small thing, then they will ask for more information,” he added.
According to Infosys, through the settlement process, it wants to resolve the allegations relating to the company not seeking prior and separate approval of the nomination and remuneration committee and the audit committee in relations to the severance agreement entered into with the former CFO.
Drama over high payments
Wayback in 2015, Infosys has entered into a severance agreement with ex-CFO Rajiv Bansal. The company had agreed to pay Rajiv Bansal a sum of Rs 17.38 crore, equalling his 24 months’ pay for the financial year ending March 2015 following his resignation. But the company has disbursed only Rs 5 crore, with the remaining amount being withheld pending clarifications on the terms of the severance contract. “Certain payments to Rajiv under the agreement have been suspended pending certain clarifications with regard to such rights and obligations,” Infosys said in a statement.
In June 2016, Infosys co-founder Narayana Murthy questioned about the disclosure norms of the package disbursed to Rajiv Bansal. Following it, in September 2016, Infosys suspended payments to Rajiv Bansal. Earlier this year, Infosys founders Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani wrote to the board expressing their concerns over corporate governance with the board, including the quantum of salary hike given to the CEO Vishal Sikka and the size of the severance packages given to former CFO Rajiv Bansal and former General Counsel David Kennedy.
Narayana Murthy had also questioned the ability of the board, led by then non-executive Chairman R Seshasayee, on certain decisions taken by the company in the last one year, feeling that the board should have been more proactive in questioning the decisions at their end.
Meanwhile, shares of Infosys were trading little changed, up 0.3% at Rs 993.35, earlier in the morning trades it rose 0.65% to hit a day’s high of Rs 996.9 on BSE.