Activist shareholders a risk, says Infy

Company also finds negative impact of media coverage

Infosys, India's second-largest IT exporter, has said that actions of 'activist shareholders’ is a risk factor which may impact the company's ability to execute strategic priorities.

“Actions of activist shareholders may adversely affect our ability to execute strategic priorities and could impact the trading value of our securities,” the company stated in filing with the US Securities and Exchange Commission (SEC).

The founder promoters of Infosys led by N R Narayana Murthy had recently raised questions on the corporate governance in the company and payment of high compensation for CEO among others. They had also criticised the huge severance pay offered to former CFO Rajiv Bansal and legal counsel David Kennedy.

Infosys said in a newly-added risk factor to its 20F filing with the SEC stated that responding to actions by activist shareholders can divert the attention of our board of directors, management and our employees and disrupt our operations.

Strategic plan

“Such activities could interfere with our ability to execute strategic plan,”  the company said in the filing. “The perceived uncertainties as to our future direction could affect client and investor sentiment, resulting in volatility in the price of our securities,” the IT major said.

The Bengaluru-based company also highlighted the potential impact of negative media attention in the filing. “Media coverage and public scrutiny of our business practices, policies and actions has increased dramatically over the past twelve months, particularly negative and in some cases, inaccurate posts or comments in the media, including through the use of social media,” the company said.

To douse the fire during the spat with the founder shareholders and its media coverage, Infosys CEO Vishal Sikka had written to employees asking them ‘not to get distracted by media speculation’.
The filing also highlighted the risks related to legislation and regulatory compliance in an environment where there is growing clamour for anti-outsourcing sentiments.