Table of Contents
WHAT EXACTLY HAPPENED?
- An anonymous group calling itself “ethical employees” has complained to the board of Infosys and the US Securities and Exchange Commission (SEC)
- Alleging that the company is taking ‘unethical’ steps to boost short-term revenue and profits.
- It also stated that the complainants have emails and voice recordings to substantiate the claims.
ALLEGATIONS ON WHOM?
- The letter has pointed to multiple instances of unethical practices by CEO Salil Parekh and CFO Nilanjan Roy.
- Chief Executive Officer (CEO) is the highest-ranking position in a company who oversees the entire company.
- The Chief Financial Officer (CFO) oversees all the financial aspects of the company.
WHAT ARE THE ALLEGATIONS?
- CEO Salil Parekh is bypassing reviews and approvals for large deals.
- He (Parekh) directs them to make wrong assumptions to show margins.
- CFO is compliant and he prevents us from showing in board presentations large deal issues.
- Several billion-dollar deals of last few quarters have nil margin.
- Complainants were asked to not fully recognise visa costs in the quarter.
- They were pressured to not immediately recognise $50 million in reversals in a contract.
- In large contracts like Verizon, Intel, JVs in Japan, ABN AMRO acquisition, revenue recognition matters are forced, which are not as per accounting standards.
- CEO, and CFO were pressuring the finance team to show more profits in their treasury management ‘by taking risks and making changes to policies’.
WHAT INFOSYS SAID ON THIS?
- Infosys is examining the charges made by the whistleblower.
- The whistleblower complaint has been placed before the Audit Committee as per the company’s practice.
- It will be dealt with in accordance with the company’s whistleblowers’ policy.
- The chairman heads up the board of directors for a company. A board of directors is a group of individuals elected to represent shareholders.
- The CEO runs the company but the CEO is appointed by the board.
IMPACT OF WHISTLE-BLOWER COMPLAINT?
- The charges wiped more than $7 billion off the company’s market value in a single day.
- The company’s American Depository Receipts (ADRs) listed on the New York Stock Exchange or NYSE also fell over 15%.
Latest Burning Issues | Free PDF