Former Infosys directors signed no-disparagement pact after their resignations

Infosys signed a binding agreement with departing members of its board - R Seshasayee, Jeffrey Lehman, and John Etchemendy— last August, to prevent future disclosures about or disparagement of the company, according to the annual filings made by the software services exporter.

The so-called mutual release of claims, which was signed after the resignation of the three directors, was disclosed in the company’s annual report released on Monday. A former Infosys director termed it as “unprecedented.”

“I am not aware of any such precedent of independent directors signing such an agreement in the past,” said V Balakrishnan, a former Infosys CFO, and board member.

The NYSE-listed company had also signed a similar agreement with its former CEO Vishal Sikka, following his abrupt exit from the company after months of public wrangling over alleged corporate misgovernance.

“Usually when an employee separates from a company, they both sign such an agreement and mutually agree that no party will raise any claims in future,” Balakrishnan told ET.

“Such a binding agreement with board members (is) unprecedented,” he said. Infosys declined to comment. Seshasayee did not reply to ET’s queries.

Seshasayee - the chairman of the Infosys board when Sikka was the chief executive — had defended Sikka’s decisions including the purchase of the Israeli technology company Panaya as well as the severance payout of Rs 17.38 crore to its former chief financial officer Rajiv Bansal.

The board had come under heavy fire from Infosys founder NR Narayana Murthy, who questioned these decisions and alleged that they were indicative of grave lapses in corporate governance.

The resulting furore led to large-scale management changes including the exits of the board members and Sikka, paving the way for the return of co-founder Nandan Nilekani as non-executive chairman at the end of a tumultuous fortnight in August 2017. Nilekani reviewed the independent investigation-- by law firm Gibson, Dunn, and Crutcher --actioned by the company over the allegations of corporate misgovernance, and said there was “no wrongdoing.”

Experts are of the view that mutual release of claims between the company and its erstwhile directors would be beneficial to both parties.

“The agreements of mutual release would likely contain clauses for non-disparagement and non-disclosure that protect the interests of the company as well as the erstwhile directors,” Shriram Subramanian, founder and managing director at InGovern Research Services, said.

“The agreement will also indemnify directors of any liabilities due to any actions taken by them in the normal course of their duties as director,” he added.

For existing directors, Infosys continues to indemnify them against repercussions arising from their role on the company’s board. This year, it also said that it would also meet expenses related to public relations consultations, if required, due to issues arising from their board role.

Earlier this month, Ravi Venkatesan, who was also part of Seshasayee’s board at Infosys, quit to take up what the company said would be an “exciting new opportunity.” ET has reported that he is a likely contender for a leadership position at the Indian unit of online retail giant Amazon.

Venkatesan is the first board member to leave after the return of Nilekani at the helm of Infosys.

Nilekani has also put his stamp on the responsibilities allocated to board members. While Kiran Mazumdar Shaw was elevated as the lead independent director, Roopa Kudva and Punita Kumar-Sinha had to step down from some committees.

Kudva, who also faced Murthy’s ire, stepped down as chairperson of the audit committee to be replaced by D Sundaram. The company’s finance and investment committee, which Kumar-Sinha chaired, was dissolved in April. Both Kudva and Kumar-Sinha remain part of the audit committee, stakeholders’ relationship committee, and corporate social responsibility committee.

“Roopa Kudva ceased to be the chairperson of the committee effective October 24, 2017 but continued as a member of the committee,” the company said in the report. Her remuneration dropped from Rs 1 crore in FY17 to Rs 97 lakhs in FY18

In July, Kudva and Kumar-Sinha stepped down from the risk and strategy committee. Kumar-Sinha’s term on the board ends in 2021, while Kudva’s role on the board ends in 2020.

Infosys management has considered shareholder activism as a potential risk to the performance of both the company and its shares. “Attempts to fully address concerns of activist shareholders may divert the time and attention of our Management and Board of Directors and may impact the prices of our equity shares and ADSs,” the company wrote in its annual report 2017-18.