Nilekani’s Infosys update: More questions than answers

Faced with a barrage of questions, IT behemoth Infosys on October 22 released an ‘update’ that sought to offer details about its actions in connection with the latest whistleblower complaints against its CEO Salil Parekh and CFO Nilanjan Roy.

Attributed to Chairman Nandan Nilekani, the statement appears to be an attempt by Infosys to buy time rather than provide clarity. The investigation, in theory, should help clarify matters, but Infosys’ stakeholders — its shareholders, employees and customers — deserve to know more right now. In that respect, the Infosys update has several unanswered questions, namely:

• What happened between September 30, 2019, (when the first anonymous whistleblower complaint was received) and October 10, 2019 (when the audit committee of the board first heard about it formally)? 10 days is a long time to wait before a complaint of such a serious nature is addressed by the board. This is especially problematic for Infosys, given its track record of handling whistleblower allegations against senior executives. The whole Vishal Sikka saga and the circumstances leading to the appointment of Parekh should have been lessons enough.


• The undated whistleblower complaint largely deals with allegations relating to the CEO’s international travel to the US and Mumbai.” This is how the statement sums up the whistleblowers’ allegations. However, the fact is the allegations are far more serious. In the September 20 letter, the first allegation relates to purported irregularities in how revenue and costs are recognised. The whistleblowers say billions of dollars in deals have no margins at all and the CEO spoke disparagingly about three of the board members, one of whom chairs the audit committee and the other the lead independent director. Treasury has also been asked to take undue risks, the letter says. There is only one paragraph about the CEO’s travels. To make it appear as if the whistleblowers are only making personal allegations is disingenuous. How did Nilekani allow a statement of this sort to be attributed to him? Surely, he values his credibility.

• 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.” This sentence begs many questions. Did Infosys ask the whistleblowers for the emails or recordings while assuring them that their identity would be protected? What steps did Infosys take to verify, prima facie, the veracity of the allegations? There is just no clarity. And what does the company mean when it says ‘generalized’ allegations? Surely, there are some very specific allegations, including references to contracts with Verizon, Intel, joint ventures in Japan and the acquisition of ABN Amro’s mortgage service unit. One hopes Infosys is not suggesting that its investigations will not involve accessing the emails and recordings alluded to by the whistleblowers.

• 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 obvious question is, when after October 11 did Infosys consult with Ernst & Young? The same day? The next day?

The manner in which Infosys has dealt with this issue is far from the standards expected of the company. Infosys issued a statement only after The Economic Times, which broke the story, contacted it for a statement. The latest update is far from clarificatory.

N R Narayana Murthy, the Infosys founder who had led the charge against Sikka for alleged misgovernance, is holding his peace for now. Nilekani’s reputation is on the line and any damage this time will be permanent — both to Infosys and Nilekani’s reputation.

Infosys must resist the temptation to hide behind half-truths. Instead, it must truly embrace the transparency that it says it holds dear and explain the manner in which the issue has been handled so far. It must fully assist in a time-bound and thorough investigation which examines all the evidence. It must also take credible action based on the outcome of the investigation. Anything less, and Infosys will be doing a disservice to itself.