Infosys gives employees Rs 147-crore stocks amid whistleblower allegations

Currently, Infosys is building up a strong legal defence to present its case before the regulators
Amid the flutter created by whistleblower accusations of unethical practices by the Infosys management, the company has granted restricted stock units (RSUs) to 6,949 mid-level employees, worth around Rs 147 crore under a 2015 incentive compensation plan. 

“The date of grant for these stock incentives is November 1, in line with the company’s compensation calendar timelines,” the Bengaluru-headquartered information technology (IT)-services firm said in a regulatory filing. 

This has happened at a time when an anonymous group calling itself Ethical Employees, in a letter dated September 20, alleged that Infosys’ current management was taking “unethical” steps to inflate short-term revenue and profit. 

In the letter, the whistle-blower flagged concerns related to several zero-margin deals, which were allegedly closed by the current management flouting norms. The letter was made public on Monday, after which Infosys’ stock price has lost about 16 per cent in four trading sessions. 

In April this year, the board of Infosys adopted a new stock plan called “Expanded Stock Ownership Programme”, under which 50 million shares will be issued to employees. The new plan has linked ownership to performance, depending on three parameters — relative total shareholder return (TSR) against eight peer group companies such as TCS, Wipro, HCL Tech, Accenture and IBM; on relative stock performance against domestic and global indices comprising Nifty50, S&P500 and MSCI; operating metrics such as total revenue, digital revenue and operating margins.

Under this new plan, the company has granted stock options worth Rs 10 crore to its Chief Executive Officer and Managing Director Salil Parekh and Rs 4 crore to its Chief Operating Officer and whole time director U B Pravin Rao.

Some analysts pointed out that linking of stock options to share price could be one of the factors for inflating profit alleged by the whistleblower. However, company sources said this argument does not hold any merit as granting of stock options under the 2019 plan is yet to begin. 

Currently, Infosys is building up a strong legal defence to present its case before the regulators. Apart from facing investigations from the Securities and Exchange Broad of India and US SEC, Infosys is also facing a class-action suit from Rosen Law Firm in the US.

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