Explained: The Infosys allegations, and why it mattershttps://indianexpress.com/article/explained/explained-infosys-allegations-and-why-they-matter-ceo-salil-parekh-nilanjan-roy-nandan-nilekani-6082094/

Explained: The Infosys allegations, and why it matters

Infosys said it is investigating claims by anonymous whistleblowers about irregular accounting. Shares of the company, which fell sharply by nearly 16 per cent on Tuesday, are not out of the woods.

The whistleblowers also claim that they have emails and voice recordings, which they will “share when investigators ask”.

Shares of Infosys fell sharply by up to 15.9% on Tuesday after it emerged on Monday that a group of whistleblowers had written a letter to the company’s Board alleging unethical practices by its current CEO Salil Parekh and CFO Nilanjan Roy.

The company had on Monday confirmed that it had received the whistleblower complaint, and said that the same had been placed before the audit committee as per the company’s policies.

However, the markets failed to derive any comfort from a statement issued by Infosys chairman Nandan Nilekani on Tuesday. In his statement, Nilekani said that the law firm of Shardul Amarchand Mangaldas & Co. would conduct an independent investigation — and that in order to ensure their independence, the CEO and CFO have recused from this matter.

What do the allegations pertain to?

Though Nilekani’s statement states that the whistleblower complaint largely deals with allegations relating to the CEO’s international travel to the United States and Mumbai, it is learnt that in their letter, an anonymous group of Infosys employees have accused the CEO and CFO of indulging in “unethical practices”.

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The compliant alleges that “critical information” has been hidden from the auditors and the Infosys Board. It also says that in large contracts like those with Verizon and Intel, in joint ventures in Japan, and in the ABN-Amro acquisition, “revenue recognition matters are forced which are not as per accounting standards”.

The whistleblowers also claim that they have emails and voice recordings, which they will “share when investigators ask”. Alleging irregularity in late deals, the whistleblowers in their note said that the “CEO is bypassing reviews and approvals and (has) instructed sales not to send mails for approvals”.

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Stock not out of the woods yet

Infosys’ shares tanked about 16 per cent in their worst intra-day fall in over six years during the day, after the company said it is investigating claims by anonymous whistleblowers about irregular accounting. However, the stock is likely to remain under pressure until the audit committee clears the management of any wrongdoing.

Also read | Infosys asks CEO Salil Parekh, CFO Nilanjan Roy to recuse from probe

Do these allegations hurt the company?

The complaint comes as a big blow to the company whose founders have always claimed that Infosys stood for the highest standards of corporate governance. It comes as a blow also because just over two years back, in August 2017, its then CEO Vishal Sikka had to abruptly step down as the company grappled with serious allegations of corporate governance lapses.

With back-to-back episodes of alleged lapses in corporate governance, the company may lose out on its positioning as a beacon of corporate governance, and as a darling stock among investors.

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