‘Shareholder activism’ among new risk clauses listed by Infy

Infosys has introduced new risk clauses including shareholder activism as disclaimers to its business at a time when the company is experiencing a growth slowdown.

In a 20F filing with the US Securities and Exchanges Commission (SEC), India’s second largest software exporter said: “Actions of activist shareholders may adversely affect our ability to execute our strategic priorities, and could impact the trading value of our securities.”

It went on to add that responding to actions by activist shareholders can divert the attention of our board of directors, management, 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 costs. The perceived uncertainties as to our future direction could affect client and investor sentiment, resulting in volatility in the price of our securities, it said.

This development comes in the backdrop of a recent spat between iconic founder NR Narayana Murthy and the Infosys Board over corporate governance issues. This even prompted a whistle-blower to send a letter to Securities and Exchange Board of India (SEBI) alleging that ‘hush money’ has been paid out to former CFO Rajiv Bansal. The matter is under investigation. Infosys is not alone in crafting new risk clauses. A few days back, Wipro in its SEC filing, included US President Donald Trump as a danger to its business.

The filing has also blamed the media as possible risk factors, pointing out that coverage and public scrutiny of Infosys’ business practices, policies and actions have increased dramatically over the past 12 months, particularly negative and in some cases inaccurate posts or comments in the media.

Negative media coverage and public scrutiny may divert the time and attention of our board and management and adversely affect the prices of our equity shares and American Depository Share (ADSs), the filing said.

Any negative media coverage in relation to our business, our board or directors or senior management regardless of the factual basis for the assertions being made, has in the past and may in the future adversely impact our reputation, it added.

Further, responding to allegations made in the media may be time consuming and could divert the time and attention of our board of directors and senior management away from our business. Any unfavourable publicity may also adversely impact investor confidence and affect the price of our equity shares and ADSs, it said.