Narayana Murthy's allegations

There is no doubt that Mr.Narayana Murthy has made serious allegations against the Board of Infosys. He has alleged that the company's governance standards have plummeted since he, his co-founders and early adopters like Mohandas Pai and Balakrishnan left the company voluntarily in 2014.

Murthy has demanded quite a few responses from the Board. Some interesting aspects are covered here. While reading these demands, doubts may arise in our minds. These are also pointed out.

"The most worrisome aspect of the whistle-blower accusation is his or her claim that there was an e-mail sent by Mr. David Kennedy to Dr. Vishal Sikka that Mr. Kennedy could not hide the Bansal agreement from the board and the CFO any longer. It is best that the company scotches this accusation either by denying the existence of such an e-mail with proof and clearing the names of both Mr. Kennedy and Dr. Sikka, or by explaining to the shareholders what action was taken against the individuals who hid information from the board and from the new CFO who signs the SOX statement. "
Doubt: In case such an e-mail does not exist, how does the company prove its non-existence? Presence is provable. Is absence also provable?

"The general belief among a large number of shareholders is that the current attitude of the board is a clear example of the worst board governance in India’s corporate history."

Doubt: Since Murthy believes in data and data alone, does he have enough evidence say by way of a survey to prove his contention?

"Several investors have expressed concern about the lack of transparency in the press release on the Gibson Dunn Crutcher (GDC) Report. The general impression in the market is that the Infosys board has spent lots of shareholder money in hiring expensive lawyers and obtained a clean chit for themselves from these lawyers. It is very important to remember that none of these expenses would have been incurred if the board and the company management had not committed serious mistakes regarding Rajiv Bansal agreement and David Kennedy agreement."

Doubt: Murthy raised doubts about these agreements with ex-CFO etc. necessitating further investigation. Is it proper for Murthy to blame the Board for ordering these investigations? Murthy has also clarified that he had advised Seshasayee to obtain investigation reports from impartial agencies (he had named a few including some former independent directors). Is it proper for Murthy to complain about the cost now? Of course, the Board did not go by Murthy's recommendation regarding agencies named by him.

"It would be proper for the board to put all the three investigation reports (Cyril Amarchand Mangaldas (CAM) Report, Latham and Watkins (LW) Report and Gibson, Dunn and Crutcher (GDC) Report) and the Panaya valuation report on the website of the company, and also provide a point-by-point denial of the whistle-blower accusations fully supported by data and facts. The whistle-blower has made serious allegations and just a top-level press release is not sufficient. The company should provide answers to the following questions emanating from the whistle-blower accusations. This should not be difficult since the board claims that three separate well-known law firms have investigated the issues thoroughly and since the board has spent huge amount of money on investigations."

Doubt: Murthy is unclear whether he says that the whistle-blower's accusations are fully supported by data and facts or he wants the Board to clarify with data and facts. Sowing seeds of suspicion by skillful positioning of words is an art.

"a. Can the company categorically deny that any employee and / or his / her relative (spouse, father, mother, brothers, sisters, nephews and nieces, children, spouse’s father, mother, sisters, brothers, nephews and nieces) benefitted personally in the Panaya acquisition?"

Doubt: Is it expected of any company to take a declaration from every employee that there is no personal benefit to him / her and relatives in an acquisition? Murthy would be justified in restricting his enquiry to directors and top management.

"c. If the answer to question 2a is YES, then can the company provide the names of Panaya investors related to Infosys employees with the nature of their relationship to the Infosys employee (spouse, father, mother, brothers, sisters, nephews and nieces, children, spouse’s father, mother, sisters, brothers, nephews and nieces) and the number of shares they held on the date that Panaya was acquired by Infosys?"

Doubt: Does Murthy mean 'if the answer is NO'?

"Has the culture of the company changed (since the founders left) to reward people who hide information from the board?"

Doubt: Good sarcasm.

One person has responded to Murthy's efforts to pin down the Board as follows:

Richard Armond: "Infy under Mr Murthy was a better managed company and grew much faster than under Sikka. Today Infy can barely keep up with the growth of its peer IT companies in India. There have been murders on campus and a rape. Yet, today deluded Infy employees are more rattled by Sikka's exit."

Doubt: Would Murthy's next missile deal with murders and rape in Infosys?