MUMBAI - Infosys has too much bad-governance baggage. Shares in the $46 billion Indian IT firm tumbled 14% on Tuesday on the prospect of its second leadership crisis in just over two years. This time, a group of whistle-blowers are accusing Chief Executive Salil Parekh of bending accounting rules to boost short-term profit. Investors are not giving the Bengaluru-based giant the benefit of the doubt.

The latest mess is laid out in a letter published by The Economic Times newspaper on Monday. A group labelling itself “Ethical Employees” charges Parekh with bypassing approvals and reviews for deals, and says he wanted the group to report large contracts, like those with Verizon and Intel, in ways that did not meet accounting standards. The whistle-blowers, who claim to have emails and voice recordings, also accuse Parekh of encouraging employees to withhold information from the board. Infosys has appointed an independent investigator to take a closer look. Parekh has yet to comment.

There’s a touch of déjà vu. Infosys has only just shaken off its last round of boardroom turmoil which culminated in 2017 with the abrupt resignation of the company’s first professional CEO, Vishal Sikka. His departure followed months of criticism from some of the company’s founders on issues ranging from pay to a decision not to publish an investigation into the $200 million acquisition of an Israeli tech firm. The probe into that whistle-blower complaint found no wrongdoing.

Spooked investors appear focused on the potential for fresh turmoil as much as on the litany of complaints. That suggests Nandan Nilekani’s return to the firm as non-executive chairman in 2017 hasn’t served its purpose. At the time, the co-founder and face of India’s biometric identity card scheme was called in to restore faith in the governance of a company historically seen as one of the country’s best-run.

In the period since taking the reins in January last year and until the latest trouble, Parekh delivered an impressive 56% total return on the shares, almost as much as its top rival Tata Consultancy Services. Earlier this month, Infosys even nudged up its revenue guidance. His predecessor delivered outsized returns too, however. Poor governance is, again, smudging performance.

CONTEXT NEWS

- Infosys’ Mumbai-listed shares were down around 14% at 659 rupees in morning trading on Oct. 22, after the company disclosed it had a received a whistle-blower complaint accusing Chief Executive Salil Parekh of taking unethical steps to boost short-term revenue and profit.

- A day earlier, Infosys’ American Depository Receipts closed down 12%. Indian markets were closed on Oct. 21 for a holiday.

- The company has said that details of the letter were referred to the audit committee on Oct. 10 and that law firm Shardul Amarchand Mangaldas & Co has been appointed to conduct an independent investigation.

- Infosys issued statements after The Economic Times printed a copy of the letter dated Sept. 20 which alleges that Parekh was bypassing approvals and reviews for business deals, and that his business travel expenses are also non-compliant.

- “In large contracts like Verizon, Intel, JVs in Japan, ABN AMRO acquisition, revenue recognition matters are forced, which are not as per accounting standards,” the letter from an anonymous group, calling themselves “Ethical Employees”, states.

(Editing by Clara Ferreira Marques and Katrina Hamlin)

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