Mumbai, June 13: Infosys has cautioned that shareholder activism may impact the execution of its strategic priorities and divert the attention of its directors.
The Bangalore-based IT services firm made this observation as a risk factor in a submission made to the US Securities and Exchange Commission (SEC).
Infosys was in the news after some of its founders had expressed their displeasure over poor corporate governance standards or the severance package offered to former chief financial officer Rajiv Bansal. However, in February, Infosys chairman R. Seshasayee, ruled out any battle between the founders and the board of directors.
Infosys, in form 20-F filed with the US stock market regulator, cited two factors that could divert the attention of its board of directors, thereby affecting the share price - actions by activist shareholders and negative media coverage.
According to the firm, actions by activist shareholders may impact its ability to execute strategic priorities.
"Responding to actions by activist shareholders can divert the attention of our board of directors, management and our 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.
Infosys added that negative media coverage and public scrutiny may also divert the attention of its board and management, thereby adversely affecting the prices of its shares and American Depository shares.
"Media coverage and public scrutiny of our business practices, policies and actions has increased dramatically over the past twelve months, particularly negative and in some cases, inaccurate posts or comments in the media, including through the use of social media.
"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. 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."