Multinational corporation, Infosys said actions by activist shareholders may impact its ability to execute its “strategic priorities” and disrupt its operations. The first such warning to be issued by the company, is seen as a reference to its promoters who have publicly criticised the company's corporate governance standards over the last year.
Analysts said Infosys is worried that the promoters will continue to play an activist role, notwithstanding efforts to resolve issues internally. The company, however, denied any reference to individuals in particular, and sources in the company suggested that it is a reference to the likes of hedge fund Elliott Management. In a statement, Infosys said, “Responding to actions by activist shareholders can divert the attention of our board of directors, management, and our employees and disrupt our operations. Such activities could interfere with our ability to execute our strategic plan. This may also require us to incur significant legal fees and public relations cost. The perceived uncertainties as to our future direction could affect client and investor sentiment, resulting in volatility in the price of our securities.”
When asked if it was hinting at its promoters, it said, “Our industry is undergoing significant transformation. Over the past year, there have been specific instances of companies in our industry seeing active participation and discussion with shareholders and stakeholders. We would like to categorically state that 'activist shareholders' called out as a risk in our Form 20F does not refer to any particular group of investors or individuals.” Founders of the company has persistently voiced concerns and criticisms in the past one year. NR Narayana Murthy has repeatedly expressed his displeasure over chief executive Vishal Sikka and chief operating officer UB Pravin Rao's compensation.
MD of corporate governance research firm InGovern Research Services, Shriram Subramanian said the reference to founders as activist shareholders cannot be ruled out. “The board will have to take inputs from any activist shareholder, including founders, and examine the merits of it and deal with it appropriately. Infosys is also vulnerable to activism like what happened to Cognizant with Elliott.”
