Ex-directors want Infosys chairman to resign

V Balakrishnan, Mohandas Pai mount pressure on R Seshasayee

Infosys Chairman R Seshasayee came under fire on Friday with two former directors, T V Mohandas Pai and V Balakrishnan, publicly asking him to step down over alleged governance issues and disclosure lapses. The company remained silent on the charges.

The pressure intensified with founder N R Narayana Murthy pointing a finger at Seshasayee. Murthy also criticised the high compensation package of Chief Executive Officer (CEO) Vishal Sikka (Rs 49 crore annually), and high severance packages of former chief financial and chief compliance officers Rajiv Bansal and David Kennedy, respectively. The company has claimed it followed governance norms in these decisions.

Pai and Balakrishnan also supported Murthy’s choice of naming Marti Subrahmanyam, Charles E Merrill Professor of Finance at the New York University Stern School of Business, as co-chairman of the company. He served as independent director on the company board for 13 years till 2011.

Both former Infosys directors, Murthy and proxy advisory firms such as InGovern have complained about the dilution of corporate governance norms in the company, since Sikka took over as CEO in August 2014. 

“In Kannada there is a saying: If you sit under a toddy tree and drink milk, people will think you are drinking toddy. Therefore, it is very important for us not only to do the right thing, but also to be seen doing the right thing. That is the whole issue,” Murthy told television channel CNN News18. 

Murthy first raised the red flag on the severance package to Bansal a year ago. On Friday, he said Bansal had been given 30 months’ salary of Rs 24 crore, but the company on Thursday had claimed Bansal was given Rs 17.38 crore, amounting to 24 months of his pay. 

One board member, who wished not to be named, said the situation is explosive and board is alive to issues. The company is in process of communicating with stake-holders including investors.

Member declined to elaborate on issues of compensation.

The company got a clean chit from an independent investigation done by Mumbai-headquartered law firm Cyril Amarchand Mangaldas. The same law firm has been hired to engage with shareholders, including the founders, on governance lapses. Infosys has maintained that it complied with fiduciary duties and adopted good governance norms.

“There is no need to bring in a legal firm to intermediate between the founders and the board. It is the board’s job to directly engage with the large investors, whenever there is a concern,” said Balakrishnan. “My advice as a shareholder will be that the chairman should step down and they should have an interim chairman who engages effectively with the founders and addresses all the concerns.” 

Murthy did not respond to repeated emails and calls for comment. Infosys did not comment on the charge by the former directors. An email sent to Seshasayee remained unanswered.

“The report of the nomination and remuneration committee, in the company’s 2016 annual report, does not say anything about the severance package given to the former CFO. It is a very important matter, the company should write about it. When a CFO leaves, the audit committee has an obligation to meet him individually and ask if there is anything wrong,” said Pai.

The board, headed by Seshasayee, had “treated me and V Balakrishnan” shabbily, he added, when they wrote to the company for a share buyback.