InGovern questions sudden departure of Infosys' Chief Compliance Officer and his severance package
Proxy advisory and corporate governance advisory firm InGovern Research Services Pvt Ltd (InGovern) has said that the sudden departure of David Kennedy, the General Counsel and Chief Compliance Officer of Infosys Ltd, raises a serious questions about whether his departure was triggered by an event that may have material consequences on the company.
On 1 January 2017, Infosys notified the stock exchanges that Mr Kennedy has left the company after a mutual separation agreement between him and the company. The proxy advisory firm points out that Mr Kennedy was in an important position as General Counsel and it is imperative for Infosys to inform whether he resigned voluntarily or his services were terminated.
Mr Kennedy was appointed as the Executive Vice President and General Counsel of Infosys on 5 November 2014. He was based at Palo Alto in California.
As a part of the separation as well as his employment agreements, Mr Kennedy will receive severance payments of $868,250 plus reimbursements for Consolidated Omnibus Budget Reconciliation Act (COBRA) (insurance) continuation coverage over a period of 12 months. Other details of the separation agreement are not disclosed.
InGovern says, "If an employee voluntarily resigns from the company, there is no logic of paying a severance package by the company. Also, in such cases the employee has to serve a notice period before leaving the company. Mr Kennedy is being paid a severance pay and is also not serving any notice period in the company, which makes it clear that his service has been terminated by Infosys."
On 13 October 2016, he was included as one of the 'Key Managerial Personnel' (KMP) of the company by the Audit Committee of Infosys. Further, his remuneration was also revised to $1,030,000 per annum including a fixed salary of $557,500 and variable salary of $472,500.
"His departure, only within two months of being given a revision in pay, is surprising," InGovern says, adding, "No reasons of his departure have been provided by the company. Also, the basis of calculating the amount of severance pay has not been disclosed to the shareholders. Infosys, in its annual report has stated that apart from Vishal Sikka, its Managing Director, no other directors are eligible for any severance pay. However, no such disclosure has been made regarding KMPs and other senior employees of the company."
As a good governance practice, InGovern says it recommends that Infosys and other companies make it as a policy to disclose the employment agreements of its KMPs as well as its Managing or Executive Directors to shareholders. The employment agreements should also contain details of severance pays, if any. Companies should also provide the basis for calculation of severance packages. Since these severance pays are significant amounts, shareholders should be notified of such employment clauses at the time of appointment of directors and KMPs.
InGovern has asked shareholders of Infosys to raise concerns and ask the company to provide clarification on four points, which include...
1. Whether Mr Kennedy voluntarily resigned or the company terminated his services?
2. If it was a resignation by Mr Kennedy, why is he being paid a severance pay and not asked to serve a notice period?
3. If he was dismissed, why has the company not provided exact reasons for his dismissal to the shareholders?
4. The basis of calculating the severance pay amount to Mr Kennedy, given that he has served only 2.2 years in this capacity in Infosys?