What will it take to satisfy Infosys’s Narayana Murthy?

Tell me the truth I want to hear.
Tell me the truth I want to hear.
Image: Reuters/Bobby Yip
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Even after the unceremonious exit of the “outsider” CEO, an overhaul of the management, and with his blue-eyed boy back at the helm of India’s second-largest IT company, Infosys founder NR Narayana Murthy remains dissatisfied.

“I stand by every question on poor governance raised in my speech to Infosys investors dated Aug. 29, 2017. The fact remains that none of these questions have been answered by the Infosys board with the transparency it deserves,” 71-year-old Murthy said in a statement late yesterday (Oct. 24) evening. “I am disappointed.”

He was reacting to an Infosys press release (pdf) issued earlier in the day, in which co-founder and current chairman (non-executive) Nandan Nilekani essentially debunked the claims that Murthy has been making since early this year. For months, Infosys’s founding team, led by Murthy, had raised serious concerns over corporate governance at Infosys under former CEO Vishal Sikka, who was the company’s first non-founding head.

In an interview in February, Murthy said Infosys’s then board was acting in a way that hinted at attempts to “hide something.” Among other things, he questioned the Rs17.4 crore severance payout to former CFO Rajiv Bansal and Sikka’s high salary. Murthy, who along with his family is among the company’s largest individual shareholders, had sought a complete overhaul of its board. Murthy had raised these issues repeatedly during various media interactions.

In August, Sikka abruptly quit, citing “the constant drumbeat of the same issues over and over again, while ignoring and undermining the good work that has been done.” This was followed by chairman R Seshasayee and independent directors Jeffrey Lehman and John Etchemendy exiting the firm.

On Aug. 24, Infosys appointed Nilekani (pdf) as its non-executive chairman with immediate effect. An elated Murthy declared he was “confident Nandan (Nilekani) will determine whether the members of the current board who were involved in the events alleged by the whistleblower exercised their proper and expected role in governance; and that he will take appropriate corrective actions. These actions will bring back the rigor of governance standards at Infosys.”

Two months on, Nilekani has mostly repeated what Sikka and Seshasayee had said when they were in charge.

The investigation reports

In February, an anonymous whistleblower wrote to India’s market regulator, SEBI, claiming financial irregularities in Infosys’s $200 million acquisition of Israeli software firm Panaya, the first purchase under Sikka. To look into the matter, the company’s board, led by Seshasayee, held an independent probe but found no wrongdoing. Despite clarifications, Murthy demanded that its findings be made public.

While the company, under Nilekani, was widely expected to meet Murthy’s demand, it only reiterated what was said earlier: that there was nothing amiss in the transaction. In fact, it added that making the investigation report public would set a bad precedent.

“After careful reconsideration, the company has concluded that publishing additional details of the investigation would inhibit the company’s ability to conduct effective investigations into any matter in the future,” a company statement said. “Confidentiality is critical to ensuring the candor and cooperation of whistleblowers and other participants in any investigative process. The precedent of releasing the full investigation reports could impair the cooperation of participants should the need for an investigation arise in the future.”

CFO’s severance

A major point of contention between the previous Infosys leadership and Murthy was the massive severance package of former CFO Rajiv Bansal, who quit in October 2015. In his February interview, Murthy even asked if the payout was “hush money.”

After looking into the matter over the last two months, Nilekani said that none of these claims were true. “I believe that all stakeholders acted out of a strong passion for Infosys, wanting what they believed to be the best for the company and to see it succeed,” Nilekani said. “In light of my review of these matters, I am fully persuaded, as is the entire board, that the conclusions of the independent investigations are correct.”

The only matter that left Nilekani dissatisfied was in the way the issue was handled. The company has now “identified opportunities for improvements in processes and practices, which have been implemented.” Infosys has also globally benchmarked its severance payout and revised its senior management’s employment contracts accordingly.

Murthy, though, appears far from placated. “The core question still is how and why the Infosys board approved an unusual and unprecedented severance payment agreement of 1,000% (of the standard Infosys employment contracts) to the former CFO, and why the board did not disclose this information proactively and much earlier,” he said in the latest statement.

“Sadly, it appears we will no longer know the truth.”