Infosys Whistleblower Drama: Stocks Down, Damage Control Mode On
Infosys shares opened with severe losses and plunged 15 percent on Tuesday, 22 October, following a whistleblower complaint alleging “unethical practices” by the company’s Chief Executive Officer (CEO) Salil Parekh and Chief Financial Officer (CFO) Nilanjan Roy.
Infosys stocks were trading over 13 percent lower at Rs 667.40 a share after falling as much as Rs 645.35 a piece. Infosys shares on the BSE closed at Rs 767.75 a share on Friday.
An anonymous letter by Infosys employees has alleged that in the quarter under review of fiscal 2019-20, the management put immense pressure on them to not recognise reversals of $50 million (Rs 353 crore) of upfront payment in FDR contract, as it will slash profits for the quarter and negatively affect the company's stock price.
“Parekh and Roy have been resorting to unethical practices for many quarters, as evident from their e-mails and voice recordings of their conversations,” said the complainants, who called themselves ‘ethical employees’ in a letter to the city-based IT behemoth's board of directors on 20 September.
‘Allegations Being Scrutinised by Audit Committee’: Chairperson Nilekani Issues Statement
Infosys chairperson Nandan Nilekani on Tuesday issued a statement, saying that the allegations against Parekh and Roy were under scrutiny by an audit committee. Here’s the full statement:
We are providing an update on the steps taken in response to the anonymous whistleblower complaints (“Complaints”) that the Company disclosed on October 21st, 2019. One Board member received two anonymous complaints on September 30, 2019 one dated September 20, 2019 titled “Disturbing unethical practices” and the second undated with the title, “Whistleblower Complaint.”
Pursuant to our whistleblower practice we have placed both Complaints before the Audit Committee on October 10, 2019 and before the non-executive members of the Board on October 11, 2019. These Complaints are being dealt with in an objective manner. The undated whistleblower complaint largely deals with allegations relating to the CEO’s international travel to the US and Mumbai.
Additionally, on October 16, 2019 the Company was made aware of a letter dated October 3, 2019 which was purportedly written to the Office of Whistleblower protection program, Washington D.C. This letter refers to the September 20, 2019 complaint, and to emails and voice recordings in support of the allegations. Although we have not been provided any of the emails or voice recordings, we will ensure that the generalized allegations are investigated to the fullest extent. Additionally, to ensure independence in these investigations the CEO and CFO have been recused from this matter.
Post the Board Meeting of October 11, 2019 the Audit Committee began consultation with the independent internal auditors (Ernst & Young) on terms of reference for their prima-facie investigation. The Audit Committee has now retained the law firm of Shardul Amarchand Mangaldas & Co. (October 21, 2019), to conduct an independent investigation.The Board,in consultation with the Audit Committee, will take such steps as may be appropriate based on the outcome of the investigation.
Our statutory auditors, Deloitte, India have also been completely updated on this matter post the Board meeting of October 11, 2019. Because the investigation is ongoing, there will be no further comment so that investigation may be conducted in a thorough and objective manner. At the appropriate time we will provide a summary of the investigations results. The Board is committed to uphold highest standard of corporate governance and protect the interests of all stakeholders.
(With inputs from IANS)
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