It’s not the first time when Phaneesh Murthy has been asked to step down on charges of sexual impropriety.
Back in 2002 Murthy was charged by an employee at Infosys, Reka Maximovitch. Infosys agreed to pay $3 million in an out-of-court settlement with Maximovitch, an American citizen of Bulgarian descent.
According to the complaint, Maximovitch started working for Murthy around October 18, 1999. Immediately after she took over her job, "Murthy began subjecting the plaintiff to an ongoing campaign of sexual harassment and pressured her to engage in a sexual relationship with him," the court papers said. This was denied by Murthy who later on reluctantly agreed to the out-of-court settlement initiated by Infosys.
After leaving Infosys, he founded his own company which was acquired by iGate.
On Tuesday, iGATE Corporation announced that its board of directors has decided to terminate the employment of President and CEO Phaneesh Murthy. Concurrently, the board has appointed Gerhard Watzinger as President and CEO on an interim basis. All changes are effective immediately.
Policy violation
The board’s decision was made as a result of an investigation by outside legal counsel, engaged by the Board, of the facts and circumstances surrounding a relationship Murthy had with a subordinate employee and a claim of sexual harassment. The investigation, which is ongoing, has reached the finding that Murthy’s failure to report this relationship violated iGATE’s policy, as well as Murthy’s employment contract. The investigation has not uncovered any violation of iGATE’s harassment policy.
“The board deliberated extensively on this matter,” said Sunil Wadhwani, Co-Founder and Co-Chairman of the board of iGATE. “We recognise the significant contributions Mr Murthy has provided over the past 10 years in helping to establish iGATE as a leader in the IT industry. He has worked hard to improve the value of iGATE, and we greatly appreciate his efforts. However, as a result of this violation of iGATE policy, we asked Mr Murthy to step down.”
No link to company's performance
“Mr Murthy’s departure was not related in any way to the company's operational or financial performance, both of which remain strong,” said Ashok Trivedi, co-founder and co-chairman of the board of iGATE. “iGATE will continue to focus on creating value for our customers and shareholders, while upholding the highest ethical standards in every area of our business. We are fortunate to have Gerhard Watzinger returning to iGATE during this transition. Watzinger possesses deep knowledge of iGATE’s business and he assumes his responsibilities as our Interim President and CEO with the full support of the Board.”
“iGATE has great resources and a deep bench of talent from which to draw upon to further create shareholder value,” said Watzinger. “We have a clear strategy that has put us in this strong position to maintain our successes into the future. Continuing to execute this strategy is our top priority.”
Wadhwani and Trivedi will work closely with Watzinger during his tenure as Interim President and CEO to ensure a seamless transition.
Search for permanent CEO
A Search Committee within the Board of Directors has been created, which will oversee the process for the identification and selection of a new President and CEO. The Committee has been charged with selecting an experienced industry veteran to take over as the permanent President and CEO and drive long-term growth for iGATE, while upholding the highest ethical standards, personally and professionally.
Watzinger has taken himself out of consideration for the role of permanent President and CEO, but he will serve as Interim President and CEO until the selection process is complete. The company does not expect to make any additional structural or executive leadership changes in the near future.
Meanwhile, Murthy is expected to give his side of the story later in the day.