Rajiv Bansal, former Chief Financial Officer (CFO) of IT giant Infosys, is likely to have an upper hand in the arbitration tribunal, expected to have its first hearing in May.
Market observers and analysts feel that though the severance package of around Rs 17 crore offered to Bansal is highly debatable and controversial, it cannot be questioned because it is based on a mutual agreement reached between the two parties. This agreement apparently had the board's approval and in due process, Rs 5 crore was already paid to Bansal.
The balance amount of around Rs 12 crore was abruptly stopped due to objections from the company co-founder N.R. Narayana Murthy and others, including former CFO Mohandas Pai. Bansal, however, has now taken the arbitration route to claim the remaining Rs 12 crore of his severance pay and a meeting for the same is scheduled next month.
“Infosys is wrong in breaching the agreement with Bansal. It is a NASDAQ-listed company and should stand firm on its ethics and honour the agreement that it had signed with Bansal as it had the board's approval. The agreement should not be dishonoured just because of the objection from Murthy and other co-founders. Otherwise, it will question the ethics of the company and many would then consider several times before entering an agreement with Infosys in the future. Broadly, it is foolishness on part of Infosys board not to honour the agreement with Bansal,” said Alok Shende, of Mumbai-based Ascentius Consulting.
Further, some observers feel a high severance package is first-of-its-kind in the Indian corporate world and is a highly debatable topic. “The details of the agreement between Infosys and Bansal aren't still clear. The agreement is controversial as the company is experiencing one of the slowest growth in its history. We have heard of such severance packages in the US, but it is a rarity in India and comes at a time when the company is not doing well,” Amit Chandra Research Analyst (IT), HDFC Securities told THE WEEK. “Whether it was appropriate on part of the Infosys board to give such a severance package to Bansal when the company is witnessing slow growth is highly debatable. Over time, things are likely to settle down.”
Another observer is of the view that under former CEOs such as S.D. Shibulal and Kris Gopalakrishnan, Infosys CFOs enjoyed a free hand as major decisions, including all expansion plans and expenditure of the company, were decided by the latter.
However, all these changed under Dr Vishal Sikka. “Under Sikka, the control of CFOs diminished as he started taking many decisions on his own. Acquisition of the Israeli firm Panaya is a classic example of this. Bansal was not keen on the deal, whereas Sikka wanted to acquire the company despite it running under losses and laying off people. Hence, differences between Bansal and Infosys board cropped up, which eventually led to the exit of the former from the company,” said Kris Lakshmikanth, founder of the recruitment firm Head Hunters Limited.
Lakshmikanth further said Bansal would have read the blue-print of the severance package deal in detail as he is an experienced CFO and would have thoroughly studied the nuances involved. “Being the CFO, Bansal would have ensured that each and every clause of the agreement, which he has done with the Infosys board, was carefully drafted. The board is keeping quiet for the time being, but Bansal has a strong case in his favour and he is likely to get the balance money, and that too, with interest. It is only a short-term pressure from Naryana Murthy as an agreement with the board of such a large firm, which is cash rich, is unlikely to be dishonoured in the long-term,” he explained.