Bengaluru: Infosys Ltd: Make reports of internal investigations public.
This should be the answer Infosys shareholders should offer to the management and board at the annual general meeting on Saturday, 24 June.
This simple message, if delivered by shareholders, and if accepted by Infosys, can help put an end to the six-month slugfest between the founders and the board.
Since October 2015, Infosys has hired reputed law firms to undertake three investigations. These include two investigations into management and board’s decision to give a generous Rs17.38 crore in severance money to former chief financial officer, Rajiv Bansal.
A third investigation, findings of which were made public on Friday evening, looked into many grave charges, one of them pertaining to conflict of interest when Infosys spent over $220 million to buy Panaya in February 2015.
Although Infosys says that all three investigations did not find any wrongdoing in its decision to give separation money to Bansal or any impropriety in acquisitions, the board has not made all the reports public.
Rather than getting into a brinkmanship battle with the founders and berating some of the founders’ claims as distractions, the Infosys board should disclose the scope of the probes or the key findings of the reports, or the recommendations made in the three reports, or what actions, if any, the company took, based on these findings.
Making these reports public will help, shareholders should argue. If the earlier investigations did not find any wrongdoing, why did Infosys sack its former chief general counsel, David Kennedy, in December last year? Why did Infosys reverse its decision, and abruptly halt the severance money to Bansal after paying a little over Rs5 crore? After all, Infosys’s non-executive chairman R. Seshasayee did justify the decision to pay severance money to company’s shareholders at last year’s AGM. Importantly, why did Bansal take Infosys to arbitration proceedings?
Sadly, Infosys’s decision to not make any of these reports public has only made matters worse, and got an agitated founder, N.R. Narayana Murthy, to question some of the decisions made by the board, and even ask Seshasayee to resign.
It is time Infosys takes a leaf out of Uber Technologies Inc.’s book, and comes clean. Uber in February this year hired the law firm of former US attorney general Eric Holder to look into employee concerns over a toxic workplace culture at the company.
Earlier this month, Uber made the report and the 47-odd recommendations public. Some of these suggestions asked Uber to “review and reallocate the responsibilities of Travis Kalanick”, induct members on to the board, and appoint an independent chairman. Uber’s board has already read out the riot act: earlier this week, a shareholder revolt made Kalanick quit as CEO of the start-up he founded.
Again, shareholders should, justifiably, remind the board that this transparency will put an end to any talk of poor corporate governance, which in turn should help the management focus on business, and thereby put Infosys back on the growth pedestal. This will kick life into the firm’s shares, which have lagged over the past 18 months. Between 1 January 2016 and 22 June 2017, Infosys shares are down 13.2%, lagging the BSE IT Index, which fell 9.36% even as the Sensex gained 20.33%.
On the business side, Infosys reported a dollar revenue growth of 7.4% last year and expects to grow between 6.1% and 8.1% this year. This is far short of the 11.5% dollar revenue growth reported by Infosys in the year-ended March 2014, before Vishal Sikka took over as the first non-founder CEO in August 2014.
Profitability has fallen more than 200 basis points to 24.7% under Sikka’s watch. Although overall attrition levels are stable, Infosys continues to see senior management departures—nine executives of the rank of executive vice-president (EVP) and above have quit Infosys since he took over. Murthy’s second stint at Infosys saw 12 senior management departures (although not all of them were EVPs).
Unsurprisingly, a few analysts are getting queasy over Sikka’s three-year stint.
“Infosys created a new board committee, comprising twin chairs and an independent director to advise management on executing its strategy. Infosys also shared 10 client cases using automation and innovation in its preamble. However, with <1% staff trained on AI, <10% trained on digital, falling growth and dropped long-term targets, its strategy appears considerably away from fruition,” Ankur Rudra, an analyst at CLSA, wrote in a note dated 15 June, after the company made its annual statutory filing to the US Securities and Exchange Commission. Again, shareholders should press the management on the reasons behind its failure to execute, and the road ahead. It is time the loyal shareholders rise beyond the praise and theatrics witnessed at annual meetings. Good luck, and over to you Infosys shareholders.