Infosys halts payments to former CFO Rajiv Bansal

Infosys Ltd has stopped the remaining instalments of the severance payment of Rs17.38 crore promised to former chief financial officer Rajiv Bansal after some of the company’s founders expressed their unhappiness with the decision, three people familiar with the matter said.

The move raises questions about the independence of the board of the country’s second-largest software services firm. None of the founders is on the board or in an executive position. The move also reopens the issue of why the board felt the need to give Bansal a generous severance payment in the first place.

Mint could not confirm the reason why Infosys has held back Bansal’s payments or the exact amount of money it has already paid to him. At the company’s annual general meeting (AGM) on 18 June, Infosys disclosed that it had already paid two of the 10 instalments.

R. Seshasayee, the non-executive chairman of the board, did not deny that the payment was being stopped, but seemed to suggest that it was being done in keeping with the terms of the agreement with Bansal. “This is a severance agreement. There are rights of the parties in the contract, and the contract will be administrated in line with the rights of the parties. Period. That is all,” he said in an interview, without sharing more details.

That seems to indicate Bansal may have not met some of the terms.

Bansal declined to comment.

“The board took cognizance of the unhappiness raised by the founders and hence has decided not to pay the outstanding dues to Bansal,” said one of the three executives, who did not want to be named. This person added that, as a group, the founders hold the single largest chunk of stock in Infosys.

Proxy advisory firms raised concerns about the latest twist in the story.

“The real reason why Infosys paid this severance money is still unknown to shareholders,” said Shriram Subramanian, founder and managing director of proxy firm InGovern Research Services. “Now, this twist of company holding back the payments is not a very good development.”

Mint reported on 30 May details of the unusually high severance payment promised to Bansal, who had earned only Rs4.72 crore in the previous year at Infosys.

Since then, Infosys has been questioned by shareholders, proxy advisory firms and its founders on the rationale behind this separation money.

To quell shareholder unease, Seshasayee justified the rationale behind the payment at the June AGM in Bengaluru.

Infosys maintains that the severance payment reflects the “enhanced non-compete and non-disclosure agreement” the company signed with Bansal, although the board continues to shy away from clarifying what this enhanced non-compete agreement means.

In an interview last week, Seshasayee declined comment on whether the founders had exercised their influence over the board.

“This is an entirely legal issue. All I need to say is that there are no extraneous considerations for the administration of the contract. It will be driven through the contractual rights,” he said.

Only five of the seven original co-founders, N.R.Narayana Murthy, Nandan Nilekani, S.D. Shibulal, Kris Gopalakrishnan and Dinesh Krishna Swamy are categorized as promoters of the company. Together, they held a 12.75% stake in the company as of 31 June.

Murthy and Nilekani did not respond to emails seeking comment, while Shibulal and Gopalakrishnan declined comment. Krishna Swamy did not respond to calls.

This is not the first instance that Infosys founders, who are not on the company’s board anymore, have opposed a big decision by the current board.

In April, they abstained from voting in favour of chief executive officer Vishal Sikka’s reappointment to indicate their displeasure with a salary hike that took his remuneration to $11 million a year.

The founders also objected to the appointment of Punita Kumar Sinha, wife of minister of state for aviation Jayant Sinha, as an independent director.