BROAD//SHEET
Wednesday, October 23, 2019
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City of the day: Kochi

Lonely Planet released its annual list of best cities to visit in 2020. And look who’s come in at #7. It’s none other than Kochi, which the guide describes as a “nicely chilled city in southern India.” Also touted: the city’s “boho cafes, intimate homestays hidden away in lazy, colonial-era backstreets, and a raft of forward-thinking galleries.” Also: Salzburg, Austria took the top honours, followed by Washington DC and Cairo. DC? Really?

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EVERYONE'S TALKING ABOUT...

The biggest news story today, explained.

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The big fat mess that is Infosys

A whistleblower complaint has raised serious questions about accounting practices of one of India’s leading global tech companies—and added to its history of scandals.


Remind me about Infosys: Headquartered in Bangalore, Infosys provides outsourcing, consulting and IT services in over 45 countries. It is one of the biggest successes of India’s tech industry and the outsourcing revolution that transformed the Indian economy. And its founders—NR Narayana Murthy, Nandan Nilekani et al—are held up as entrepreneurial rockstars. Infosys is also one of the few Indian companies to be listed on the New York Stock Exchange. 


Ok, so what happened? An anonymous group called Ethical Employees filed a whistleblower complaint with the US Security and Exchange Commission.  The allegations—repeated in letters to the Infosys board—are as follows:

  • The company’s CEO Salil Parekh and CFO Nilanjan Roy used “unethical practices” to boost short term revenue and profits—and hide information from the board and auditors.

  • The least serious of these allegations relate to personal travel expenses and tax deductions claimed by the CEO. For example: Parekh’s weekly personal trips between Bangalore and Mumbai were footed by Infosys.

  • The second set of complaints relate to the company bidding for billion-dollar contracts that offered low or zero profit margins—i.e. offered little benefit to the company.

  • The most serious charges are that the two men fudged accounting practices to hide costs, which in turn helped boost the appearance of short-term profits. For example, the H1-B visa costs for its Indian employees in the US were not fully revealed in its books.


But most importantly: There was a willful coverup of these practices: “CEO is bypassing reviews and approvals and instructing sales not to send mails for approval. He directs them to make wrong assumptions to show margins. CFO is compliant and he prevents us from showing in board presentations large deal issues. CEO told us, ‘No one in the board understands these things. They are happy as long as the share price is up. These two Madrasis (Sundaram and Prahalad) and Diva (Kiran) make silly points. You just nod and ignore them.’” 


(The ‘Madrasis’ being board’s independent directors D Sundaram and DN Prahalad, while ‘diva’ refers to Infosys' lead independent board director and Biocon Chairman Kiran Mazumdar-Shaw. )


What’s the proof? The whistleblowers claim that they have emails and voice recordings that have been shared with the SEC in the US—but have not been shared with Infosys because the whistleblowers feared their identities will be exposed.


What does Infosys say? Chairman and co-founder Nandan Nilekani issued a statement that “the generalized allegations are investigated to the fullest extent.” The company has hired both an independent auditor Ernst & Young and a law firm to conduct an independent probe. But many are unsatisfied with Nilekani’s response. A particular sticking point is its claim that the “undated whistleblower complaint largely deals with allegations relating to the CEO’s international travel to the US and Mumbai.” Also damning: the company’s history of bad corporate behaviour.


What history? The company has been in the spotlight for all the wrong reasons on at least two past occasions:


  • In 2002, Phaneesh Murthy, who served as a Director of Infosys and Infosys BPO Ltd, was fired after Infosys reached a reported $3 million settlement in a sexual harassment case.

  • But the bigger scandal unfolded in 2016-17 when a whistleblower complaint alleged that the company had overpaid for an Israeli company in 2015—because senior management had “personal interests” in the deal. 

  • Also part of the same scandal: allegations that its leaders were lining their pockets at the expense of the company. Its exiting CFO had received an exceptionally sweet severance package and then CEO Vishal Sikka paid himself a 55% hike in compensation. 


So what happens now? The complaint for now is just that—an unproven charge. However, the stock market appears to have already lost faith. Infosys shares tanked by 16.2% yesterday, hitting a six-year low. Also: Two US law firms are preparing a class action lawsuits to recover losses suffered by Infosys shareholders. 

 

The other possible casualty: Founder and former CEO Nandan Nilekani who was brought in after Sikka’s exit to restore corporate governance standards. 


The bottomline: Tech companies and its founders are held up in India as shining examples of self-made success. There is a greater expectation of integrity than say with an old-school family-run business. But even tech honchos are not immune to temptation—as was proved in the case of Satyam Computer Services, whose chairman Ramalinga Raju is serving time for cooking the books. Let's hope Infosys doesn’t turn into another such cautionary case.


Learn more: Mint analyses the company’s publicly declared numbers for signs of fraud. Also in Mint, an excellent op-ed on whether or not to trust Infosys. MoneyControl explains why Nilekani’s statement just doesn’t add up. Firstpost argues the real attention should be on India’s corporate governance and whistleblower laws. Business Standard has more on Nilekani stepping up to fight the company’s case.

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IN CASE YOU MISSED IT...

waiting for the music video of the Bappi-Gaga collab

The bad, bad news for Trump: is that the senior-most US diplomat in Ukraine confirmed—under oath and in front of Congress—that Trump did indeed pressure President Zelensky to investigate the Bidens. And it was an explicit quid pro quo: “Everything”—including US aid and a meeting with Trump—was dependent on Zelensky publicly announcing such an investigation. New York Times has the damning takeaways from Bill Taylor’s statement.


The good/bad news for Justin Trudeau: is that he is still Canada’s Prime Minister but he didn’t secure a majority. He will have to form a minority government—most likely with the support of NDP’s Jagmeet Singh, which in turn will come attached to a laundry list of political demands. (BBC News)


When Abhijit Banerjee met Modi: The Nobel prize winner had an extended one-on-one meeting with the PM—and had lots of nice things to say about him after (watch the clip here). Modi-ji also sent out a gushing tweet: “Excellent meeting with Nobel Laureate Abhijit Banerjee. His passion towards human empowerment is clearly visible. We had a healthy and extensive interaction on various subjects. India is proud of his accomplishments. Wishing him the very best for his future endeavours.” One weird note: Banerjee told reporters at a press conference that Modi told him "how the media is trying to trap me into saying anti-Modi things. He's been watching the TV. He's been watching you guys... So stop." Banerjee then refused to answer more questions on the economy or other government policies.


Chidambaram is in jail on bail: The Supreme Court granted bail to the former Finance Minister, dismissing the CBI’s claims that he will tamper with witnesses and other evidence. The CBI has charged Chidambaram with bribery and criminal conspiracy in the INX Media case (explained here). However, he is also accused of money-laundering in the same case by the Enforcement Directorate—which recently arrested him. So he will remain in jail,  but now in ED custody. (The Telegraph)


Trash is a serious hazard to cows: Our gaumatas are eating the worst kinds of trash thanks to our uncivic habits. Vets recently removed 52 kg of plastic waste from a cow’s stomach in Tamil Nadu. The News Minute has more on the Maggi and Parle-G wrappers, aluminum foil and other debris recovered from the poor animal -- over the course of a five-hour surgery! In related news, a Goa politician is far more upset that restaurant waste is turning cows into non-vegetarians: “The stray cattle were pure vegetarians earlier. But after getting used to eating leftover non-vegetarian food items like chicken and fish their digestive systems have become like that of us human beings.” Yes, let them eat plastic instead.


The emperor of Japan was enthroned: in an ancient ritual attended by the world’s royalty. Watch the key moments or check out the photo gallery.


Lady Gaga has a new India connection: First, she made news by tweeting out a Sanskrit shloka: “Lokah Samastah Sukhino Bhavantu” (May all beings everywhere be free and happy). Now Bappi Lahiri—India’s contribution to cheesy disco—claims that he has recorded two songs with the empress of pop. He told Mumbai Mirror, “Yes, two duets, with her singing in English and me in Hindi in my inimitable style.” Lahiri also says that there is a duet with Akon in the works. All Indians have gone suitable gaga. 


Turning Indian cities into jungles: We torment you with lots of bad news about climate change and environmental destruction—especially in India. So here’s a more upbeat story about how citizens are ‘rewilding’ concrete jungles in Delhi and Bangalore. Something to cheer us up and hopefully inspire us to do more. (Quartz)


How the moth turned into a butterfly: New research is rewriting the evolution story of butterflies. Scientists long assumed that moths turned into butterflies -- i.e. took to venturing out during the day -- to escape nasty, predatory bats. Turns out, they just became addicted to nectar from flowers long before bats ever came along. (New York Times)

The incredible hair of Dev Patel: This brief lovestruck ode to the Indian actor’s coiff made us giggle: “In every instance it’s buoyant; it’s glossy. It’s hair that you want to mash your face into.” (The Cut)

 

Everyone stans the French Olympic logo: So Paris will be hosting the Summer Olympics in 2020 and has unveiled its logo—which is inspiring tweets such as this: “The French Olympic logo tumbles out of bed on a Parisian morning. She tousles her messy bob, dons breton stripes and ballet flats and whisks down the stairs from her fifth-floor apartment to grab a baguette before enigmatically texting two men who are pursuing her romantically.”  You have to see it to get it. Also: BBC has more on the design of the logo.

 

How the moth turned into a butterfly: New research is rewriting the evolution story of butterflies. Scientists long assumed that moths turned into butterflies—i.e. took to venturing out during the day—to escape nasty, predatory bats. Turns out, they just became addicted to nectar from flowers long before bats ever came along. (New York Times)

 

Your daily quota of sunshine items: includes the following

  • The aye aye’s have it—as in six-fingered hands, and are the only known primates to do so. More importantly: these lemurs (really?) are very odd-looking.

  • The final trailer of ‘Star Wars: The Rise of the Skywalker’

  • This awesome Insta post of Jennifer Aniston getting real 

  • Karan Johar’s excellently serious heels.

  • Kiwi PM Jacinda Ahern’s letter to a Kerala girl.

  • This cool ad for Katrina Kaif’s channelling her inner Rihanna—yes, she has her own beauty line.

  • This seriously brave mama bird saving her chick from two vicious crows.

  • The gorgeous winners of Nikon’s Small World microphotography competition. Who knew a male mosquito could look this stunning!
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SEX, LOVE ETC.

Everything we don't know about human desire

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The sexual jealousy of Indian millennials

This is an odd and intriguing piece that claims older Indian millennials—in their mid-to upper-thirties—are jealous of their younger peers. The reason, according to one 38-year old married banker’: “I never had a one-night stand in my life… And my younger colleagues seem to hook up with seven to eight people in a month.” See? A perfect piece to argue over at happy hour.


Read: What’s making Indian professionals in their 30s super jealous? It’s sex | Quartz 

Sex, Love etc 2

Science confirms women’s terrible taste in men

New research claims to have uncovered an unappetising fact about female desire: men with psychopathic traits are more attractive to women. Just as alarming is the larger implication of the finding—that psychopathy may not be a psychological disorder but an evolutionary ‘virtue’! 


Read: Men with psychopathic traits are more desirable to women | Big Think

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