This is a story of blackmail, sex, stalking, threats, oppression, hurt feelings and revenge.

Interestingly, all this happened in and around the US offices of Infosys, 2 one of India's most well-known and respected software companies, between October 1999 and December 2000. As a result, Infosys became entangled in a scandal, that dented its reputation as a company that had the best corporate governance structure in the country. 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. Analysts wondered how a company that Forbes had once described as "a model of transparency, not just for the rest of corporate India but for companies everywhere," do such things! The saga of Phaneesh, Reka and Infosys and the issue of sexual harassment at the workplace (in India as well as abroad) were debated heatedly in corporate and media circles, as many more shocking events unfolded over the next one year.

Background Note The sexual harassment of employees manifests itself in different ways, depending on the social norms prevalent in various parts of the world. Broadly speaking, sexual harassment at the workplace can be divided into two categories: 'quid pro quo' and 'hostile working environment.' Quid pro quo involves making the conditions of employment contingent on the employee (prospective/existing) granting the employer sexual favors. The employer makes it very clear that hiring, promotions, perks, facilities etc. would be possible only if the employee consents to the former's sexual advances. This is a very 'easy to identify' and comparatively 'easy to prove' form of sexual harassment.

The 'hostile working environment' form of harassment, which is the basis of most of the court cases filed, is more difficult to identify and prove. As per a 1993 US Supreme Court ruling, this has been defined as, "When the workplace is permeated with 'discriminatory intimidation, ridicule, and insult that is 'sufficiently' severe or pervasive to alter the conditions of the victim's employment and create an abusive working environment." Thus, any employee who indulges in speech or conduct of sexually discriminatory nature, without encouragement from/being welcomed by the employee so as to create an abusive working environment and negatively affecting the employee's performance would fall under the purview of this form of harassment. Though the law clearly defines sexual harassment, the diverse socio-cultural environment of different countries complicates the matter. Reportedly, the rather 'free' behavior of Japanese bosses towards their female subordinates would come as a shock to people from the US or many other parts of the world. Even within a country, organization or office, the exact nature of the incident depends on the attitude, upbringing and behavioral patterns of the people involved. Phaneesh was an integral part of Infosys' success story. While Chairman and Chief Mentor Narayana Murthy and a few others established Infosys in India back in 1981, Phaneesh successfully set up the company's overseas businesses. He was often called the 'other Murthy' of Infosys and had many admirers within and outside the company. Not surprisingly, he was the highest paid executive in the company with a take home package of Rs 20 million. Belonging to a middle-class South Indian family, Phaneesh graduated from one of India's premier business schools. Before joining Infosys, Phaneesh was working with another software company, Sonata Software as a regional manager. He was said to be one of the main reasons for the company's good performance. In 1992, Phaneesh joined Infosys, then a $ 2 million company with a negligible presence in the US. Within three years, Phaneesh became the head of sales at the company, and in 1996, he was made the head of worldwide sales...

Phaneesh vs. Infosys - Round I

Even as uncertainty about the outcome of Reka's suit continued, Phaneesh seemed to have moved on. Media reports mentioned how many IT companies in India were trying to lure him to work for them. It was also reported that Phaneesh was planning to promote his own business process outsourcing (BPO) firm. Infosys meanwhile issued a press release that categorically stated that Phaneesh would not be taken back after the case was settled. In December 2002, Phaneesh and his wife Jaya Murthy launched Primentor (in California), an advisory firm, to outsource consulting for clients and vendors.

For clients, the services were to include partner/vendor selection, deal structuring and on-going contract administration; for vendors, the services were to include strategy consulting, service definitions, brand consulting, blueprints for the future, sales, and account management training... Phaneesh vs. Infosys - Round II At the press conference, Narayana Murthy, Nilekani and Mohandas Pai (among others), made public the entire sequence of events in the case. Firstly, Narayana Murthy made it very clear that Phaneesh was very much a party to the settlement deal and that he had signed the documents himself. Also, Infosys had reserved the right to proceed against him for his conduct and for the fact that he did not contribute financially to the settlement. Nilekani said that Phaneesh had first mentioned the lawsuit to him in January 2002, portraying it as a very minor issue. Recollecting the events, Nilekani said, "He told me he was innocent and that the charge was without merit, and the company was not at risk. He did not tell me anything else about the relationship or the other matters of things being filed against the company." However, when the issue became more serious in June 2002 and Infosys was served a legal notice, the company's board stepped in... Infosys Moves On At the press conference, Narayana Murthy did not answer a question about the fact that Reka did not seek redressal of her grievances through the company's internal systems. However, his refusal to answer did not necessarily mean that the company's internal systems were still not equipped to handle such problems. 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 (Refer Exhibit I for a note on preventing sexual harassment at the workplace)...

"The defendants (Phaneesh Murthy and Infosys) caused the plaintiff (Reka Maximovitch) to be subjected to verbal sexual harassment, to unwanted sexual advances, and to visual sexual harassment. Said sexual harassment and sexual advances were unwelcome. The defendants failed to take reasonable steps to keep harassment from occurring and recurring." 1 - Excerpt from a complaint filed by former Infosys employee Reka Maximovitch in the Alameda Superior County Court, Oakland, US, in December 2001. "Since its inception, this is probably the first piece of negative news about Infosys." - Hindu Business Line, August 07, 2002.