Ingovern asks Infyosys shareholders to seek more info on Kennedy's pay

His departure might have been triggered by material events, the proxy firm says

Bengaluru-based proxy advisory firm Ingovern Research has asked shareholders of Infosys to seek more clarity on the terms of David Kennedy's severance from the company. Kennedy, was the company's general counsel and chief compliance officer.

On Sunday, Infosys told the exchanges that Kennedy had left the company after a mutual separation agreement it entered into with him. As a part of the separation as well as his employment agreements, Kennedy will receive severance payments of $868,250 plus reimbursements for COBRA (insurance) continuation coverage over a period of 12 months.

In a note on Monday, Ingovern said, "We recommend shareholders raise concern that Infosys provide clarifications on: 1. whether Mr. Kennedy voluntarily resigned or the company terminated his services 2. If it was a resignation by Mr. Kennedy, why is he being paid a severance pay and not asked to serve a notice period 3. If he was dismissed, why has the company not provided exact reasons for his dismissal to the shareholders 4. The basis of calculating the severance pay amount to Mr. Kennedy, given that he has served only 2.2 years in this capacity in Infosys."

As a good governance practice, InGovern recommended that Infosys and other companies make it as a policy to disclose the employment agreements of its KMPs (key managerial personnel) as well as its Managing/Executive Directors to shareholders.

"The employment agreements should also contain details of severance pays, if any. Companies should also provide the basis for calculation of severance packages. Since these severance pays are significant amounts, shareholders should be notified of such employment clauses at the time of appointment of directors and KMPs," Ingovern added.

Calling Kennedy's departure, only within 2 months of being given a revision in pay, surprising, the proxy firm said, "No reasons for his departure have been provided by the company. If an employee voluntarily resigns from the company, there is no logic of paying a severance package by the company. Also, in such cases, the employee has to serve a notice period before leaving the company."

It speculated that Kennedy could have been terminated as he was being paid a severance pay and was also not serving any notice period. Since he was in an important position as the General Counsel as well as Chief Compliance Officer, his departure may have been triggered by an event that may have material consequences on the company, Ingovern said.

"Hence, it is imperative for the company to provide reasons for his abrupt termination. Also, the basis of calculating the amount of severance pay has not been disclosed to the shareholders. Infosys, in its annual report has stated that apart from Mr. Vishal Sikka, its Managing Director, no other directors are eligible for any severance pay. However, no such disclosure has been made regarding KMPs and other senior employees of the company," the Bengaluru-based firm headed by former Infosys executive Shriram Subramanian said.

In a similar case, Rajiv Bansal, the then CFO, also received a significant severance pay when he 'resigned' from Infosys on October 12, 2015. The annual report stated that his total remuneration for theperiod April 1-October 12, 2015 (a little over six months) was Rs 23.02 crore, of which Rs 21.71 crore was for 'others', which included bonus, retirals and severance pay. In comparison, he had received Rs 4.72 crore for the whole of FY15, as his remuneration.