Sebi to seek response from Infosys on whistleblower letter on severance payout to former CFO Rajiv Bansal, Panaya deal

Highlights:

1.The letter alleges that Infosys CEO Vishal Sikka agreed to a huge payout without any formal board approval, clearance from the audit and compensation committees or the shareholders

2. It also alleges that former CFO Rajiv Bansal got 30 months’ salary though his contract stipulated a payout of only three months 

3. It further said Infosys board corporate governance report, given out on a quarterly basis, should have disclosed details of this transaction

Capital markets regulator Sebi will seek response from Infosys on letter received from whistleblower at the company complaining against its CEO Vishal Sikka and the board of directors against hefty severance payout to former CFO Rajiv Bansal and the acquisition of Panaya,The Economic Times reported on Friday. 

“We will examine the response from the company on the letter Sebi has received and see if there is any violation of securities laws,” the news report said quoting a senior regulatory official, as stating.

 “We are closely monitoring the developments," the official added. 

According to the news report, the letter, marked to the Sebi chairman, says Bansal was a key management personnel (KMP) and any contract modification had to be approved by Infosys’ audit committee. 

The letter alleges that Sikka agreed to a huge payout without any formal board approval, clearance from the audit and compensation committees or the shareholders, the report said. It also alleges that Bansal got 30 months’ salary though his contract stipulated a payout of only three months. 

It further said that Sebi rules require transactions involving key management personnel to be disclosed as soon as they are entered into and the audit committee has to mention any reason for a non-arm's length transaction. 

Infosys board corporate governance report, given out on a quarterly basis, should have disclosed details of this transaction, it further said. The letter pointed out that the report for the said period did not mention any details of Bansal’s payout.

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When the newspaper asked its action on the complaint raised by the whistleblower, Infosys spokesperson said, " The company takes any whistleblower complaint seriously and there is a due process to investigate any complaint that comes to us. If we do receive any query either directly or from the regulator, we will respond to it as per the due process." 

Infosys has been facing severe criticism after it revealed the details of the severance payout to Bansal in May 2016.  

The company said it would pay him Rs 17 crore, much more than stipulated in Bansal’s employment contract. 

The payment, unprecedented in Infosys history, is a significant part of co-founder NR Narayana Murthy’s claims that governance at the company has fallen, cited the news report.

Infosys co-founder Murthy, in an interview to The Economic Times, said the payout could have the appearance of 'hush money'

However, the company's independent director said that the severance payout to Bansal followed due process, necessary approvals and all disclosures were made.

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 “In the case of Bansal’s severance, due process was followed, necessary approvals were taken and disclosures were made. There was no impropriety or ‘hush money’ involved,” the report said quoting Infosys independent director Roopa Kudva, as saying.

Even though Infosys announced that Bansal was leaving in October 2015, his severance pay was only disclosed in May last year. The company eventually paid Bansal a little over Rs 5 crore and suspended the rest of the payout after an outcry at its annual general body meeting,  the report said.

To clarify issues on the Bansal's severance payout, Infosys chairman R Seshasayee held a shareholders meet on February 13 and defended the actions of the board, PTI reported.   

Seshasayee had said the agreement was arrived at after going through circumstances that time and conceded that last year it had put in place a severance policy which does away with any subjectivity, cited the PTI report. 

The company said it had learned from the incident and is creating a policy for severance, The Economic Times reported.

“There will be no more Rajiv Bansals,” the newspaper reported quoting Seshasayee as saying.

On the Panaya deal, the newspaper report said Bansal was not in favour of the transaction and the company paid six times Panaya's revenue for the acquisition. 

The Israel company was on the verge of shutting down and a number of people were laid off before Infosys acquired it, The Economic Times report said citing a senior former employee privy to the Panaya developments.

Infosys has denied any irregularities in the buyout. Seshasayee has said though there had been some dissent, everyone was on board, it further added.

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