Mr Murthy had in 2002 quit Infosys, India's second biggest software services exporter, under controversial circumstances after

Infosys employee Reka Maximovitch, executive secretary to Mr Murthy, had complained of sexual harassment and wrongful termination of employment. Mr Murthy, one of the youngest directors and the company's head of global sales, was a rising star at Infosys and was seen by many as on track to be the company's first nonfounder chief executive. He was among the company's highest paid employees. Following the sexual harassment lawsuit, Infosys settled out of court. The company paid $3 million to Ms Maximovitch. Mr Murthy was forced to quit Infosys despite strongly denying the accusations throughout proceedings. "Phaneesh did not disclose to the company management, as an important functionary, that he had a relationship with Maximovitch and also of the fact that she had filed in the court for a restraining order against him," Infosys chairman NR Narayana Murthy had said at a press conference in 2003. (Read) Infosys paid $570,000 to Mr Murthy as part of the final settlement of his dues

In fact, Infosys had taken several measures to strengthen its grievance redressal procedures and had designed and implemented an effective sexual harassment policy. Narayana Murthy said, "The litigation is behind us. We have taken further steps to strengthen our internal processes and improve the checks and balances to handle similar situations." Mohandas Pai added, "We have conducted several training programs, widened the dissemination of information and met employees on this issue." Infosys conducted a course for all its officers and members (in India as well as abroad) on sexual harassment and the importance of being sensitized about the issue. The code of conduct provided in the employee manual was modified in line with the above decision...

Lessons to be Learned
Though out-of-court settlements were the norm for most workplace sexual harassment suits the world over, it clearly was not the best solution. Instead of addressing the problem, this solution simply paid off the victim, so that the accused could walk away. The larger issue of the emotional, physical and financial damage caused to the victim, could be dealt with only if strict policies and guidelines regarding sexual harassment were established by the companies

2002: Faces sexual harassment lawsuit filed by his former secretary Reka Maximovitch. Infosys goes for an out-of-court settlement for $3 million with Bulgarian-American national. Murthy is sacked soon after.

The events that took place during October 1999 and December 2000 became public knowledge in India only when Phaneesh Murthy (Phaneesh), the head of the sales and marketing, and communication and product services division of Infosys (and a director on the board), resigned from his post in June 2002. Phaneesh said that he had resigned in order to focus on fighting a lawsuit filed against him in the US. The lawsuit, filed by his former secretary, Reka Maximovitch (Reka) alleged that Phaneesh had sexually harassed her and unlawfully terminated her employment. The company's share price declined by 6.6% soon after Phaneesh left. The case attracted a lot of media coverage since a sexual harassment lawsuit implicating such a senior official had never been heard of in the Indian corporate world. It was also being seen as an event that could make Indian companies stop ignoring the sensitive issue of sexual harassment at the workplace. While sexual harassment of female employees was prevalent in the country, it was either not reported or ignored. Either the victims kept quite due to fear of social ridicule and fear of losing their jobs, or the matter was somehow hushed up by the management. The stance adopted by Infosys in this case seemed to go against its image of a company considered to be a model of good corporate governance. Analysts claimed that the company had kept the issue under wraps for a long time. Media reports blamed Infosys for neglecting to formulate/implement a structured policy regarding sexual harassment and for compromising on moral values for an 'economically-valuable' person like Phaneesh.

Phaneesh's achievements include:

Responsible for the phenomenal surge in Infosys' revenues. Being instrumental in the first NASDAQ listing by an Indian IT company. Pioneering the Outcomes based business model for the Indian IT industry. Transforming a loss-making mid-sized company to a billion dollar Tier 1 player with best-in-class margins. Catapulting the market capitalization of a mid-sized company by over 10 times in less than seven years.