Infosys, which announced the firing of the finance chief of its back-office arm on Tuesday, is set to sack more employees at the unit to underline its intolerance for financial impropriety as it emerged that the episode which has put an unflattering spotlight on the firm involved one of its marquee clients, Apple. Sources familiar with the company’s thinking said at least six employees at one of Infosys BPO’s European subsidiaries will be asked to leave soon after internal investigations revealed that they had produced inflated invoices and purportedly overbilled Apple for many months.
The sources insisted the amount involved was “financially insignificant”, but the company was taking harsh action nevertheless to make an example of the case that has become an unwelcome distraction for new CEO Vishal Sikka as he seeks to recapture the IT bellwether status for Infosys. On Tuesday, Infosys announced that the chief finance officer of Infosys BPO, Abraham Mathews, had been fired “for not complying with its code of conduct”. The unit’s CEO, Gautam Thakkar, also said he would quit, taking moral responsibility. “We have always adhered to the highest corporate governance standards,” said a senior executive at Infosys.
“In the particular case, although it was a financially insignificant amount, the CFO should have reported the incident. For reasons best known to him, he did not and so we were left with no option,” the Infosys executive said. Infosys declined comment on the identity of the client at the centre of the case or elaborate the reasons for its punitive actions.
A company spokeswoman said on Wednesday: “The financial irregularities are not material in nature and the company has already made required disclosures. The company has taken disciplinary action on employees. We will not be able to comment on client-specific matters or on investigation as they are confidential in nature.”
An email sent to Apple remained unanswered. Meanwhile, details emerged that Infosys first unearthed the case of financial impropriety in September, following which it set up a panel to investigate it.
One source familiar with the investigation said that in this particular case, a small team of executives appeared to have made inflated invoices for the support provided by Infosys BPO, although these inflated invoices may not have been sent to Apple. After a month-long investigation, on Tuesday, the company said it was terminating the services of Mathews while Thakkar, who is one of the 13 executive vice-presidents at Infosys, will leave the company at the end of the month.
Infosys has already announced their replacements, appointing company veteran and senior vicepresident Anup Uppadhayay as the unit’s CEO and Deepak Bhalla as the new chief financial officer. While the episode could bolster the country’s second-largest software exporter’s long-held reputation for adhering to the highest corporate governance standards, some experts believe this episode could make it vulnerable to some collateral damage, particularly if Cupertino-based Apple, the maker of iPads and iPhones, were to reconsider its decision to engage with the back-office support provided by Infosys BPO.
“Apple for long has been debating on engaging with Indian outsourcers and this incident will certainly not go down well,” said Pradeep Mukherji, president of Avasant, a Mumbai-based management consultant that helps companies choose outsourcing firms. “Apple may even want to reconsider its engagement with Infosys BPO.”
Nonetheless, Mukherji said the proactive steps taken by the company, including the change in leadership at its back-office division, should help the company limit any further damage.
“Organisations like Infosys have an effective mitigation strategy in place to contain the damage and not let it go out of control. So I don’t see why other clients will be worried.” Anil K Gupta, professor of global strategy and entrepreneurship at the Smith School of Business, The University of Maryland, said Vishal Sikka had done the right thing by cracking down hard.
“If you excuse one instance of fraud, especially at the senior executive level, then you’re going down a slippery slope. He had to act and he did the right thing. It also helps boost his credibility both internally and externally,” he said. While the episode and the attention it has generated could, according to some, leave employees and other clients anxious, Infosys officials maintain this is just an isolated case and there was no reason for its other clients need to be “jumpy”.