Insider trading charge tests Infosys' pledge to live up to Murthy ideals

When Nandan Nilekani returned to Infosys in the tumultuous days after former chief executive officer Vishal Sikka’s shocking resignation in August 2017, investors of the information technology giant breathed a huge sigh of relief.

Nilekani’s return was equivalent to the return of the lost son. He was expected to return the company to the good old days when corporate governance was not mere lip service given to shareholders during annual general meeting, but a way of life.

The Bengaluru-based IT services giant proudly displays the following words of one its co-founders Narayana Murthy as a badge of honour on its website: "Good corporate governance is about maximizing shareholder value on a sustainable basis while ensuring fairness to all stakeholders: customers, vendor partners, investors, employees, government and society."

It is, therefore, ironic that the company, once famed for corporate governance standards in India, finds itself embroiled in yet another controversy.

On Monday, the Securities and Exchange Board of India (Sebi) passed an interim order that named two employees of the IT services company in a case of insider trading in the company’s stock around the time the company released its June quarter earnings in 2020.

The order mentioned that Pranshu Bhutra, a senior corporate counsel, and Venkata Subramaniam VV, senior principal, corporate accounting group of Infosys, were in possession of unpublished price-sensitive information, which they both later used in collusion with certain outsiders to trade in the company’s stock.

Infosys in its statement post the Sebi order said that it would initiate an internal investigation on the issue and “appropriate action will be taken on conclusion of such investigation”.

The company reiterated that it has a well-defined code of conduct covering all its employees and an Insider Trading Policy that governs dealing with unpublished price-sensitive information. Yet, despite such ‘well-defined’ policies, two senior members of its staff were able to take undue advantage of insider information to make personal gains.

This after the capital market regulator in its recent changes to prohibition of insider trading norms sought the maintenance of a structured digital database by companies of the individuals with whom they share unpublished price-sensitive information.

This is not the first time that corporate governance at Infosys has come under the lens during Nilekani’s rein as non-executive chairman. In late 2019, the company’s top management was shaken after an anonymous whistleblower made allegations of interventions by the company’s current CEO and CFO in the company’s financial results.

At that time, the Infosys board formed an audit panel for an internal investigation, which eventually gave Parekh and Nilanjaan Roy the clean chit. Nilekani termed the complaints by the anonymous whistleblower as motivated and suggested that the whistleblowers may have been outside of the company. Infosys said the US Securities & Exchange Commission also conducted and concluded its own investigation on the allegations with no further action.

The latest episode puts Nilekani in an uncomfortable position with the shareholders, as he will find himself defending his company’s corporate governance standards and oversight principles to shareholders for a third time in nearly four years.

“I am happy to return to Infosys. I am committed to the highest standards of corporate governance. Will exit once my task here is completed,” Nilekani had told investors in his first-ever call post his return.

Going by Tuesday’s evidence, it seems that the sexagenarian will have to spend a few more years at Infosys before he can bow out one last time.