Forbes India 15th Anniversary Special

TCS in 2023: Five headlines for the rear-view mirror

From a surprise CEO resignation to a jobs-for-bribes scandal and allegations of IP theft, India's biggest IT company lost some sheen this year

Harichandan Arakali
Published: Dec 5, 2023 05:08:29 PM IST
Updated: Jan 24, 2024 03:03:49 PM IST

TCS in 2023: Five headlines for the rear-view mirror(File) Rajesh Gopinathan (R), chief executive and managing director of India's largest software exporter Tata Consultancy Services (TCS) and Krithi Krithivasan, CEO-designate, attends a news conference to announce company's annual earnings results, in Mumbai on April 12, 2023. Image: Indranil Mukherjee / AFP

The narrative about Tata Consultancy Services in 2023 could have been about growth, large order books, more brand recognition and IT bellwether status. Some of that happened, of course, but India’s biggest IT services company found itself in multiple negative news cycles due to events, some of which it didn’t control, and others it couldn’t have foreseen.

Here are some that come to mind as we head towards the holiday season in the IT sector’s biggest markets.

Rajesh Gopinathan quits as CEO

Gopinathan, one of the youngest CEOs in the Tata Group, resigned on March 16, shocking even insiders, less than a year after he had been given a second five-year term. “I can’t tell you how happy and light I feel,” he told reporters at a press meet on March 17. He had had his fill of the whole cycle of quarterly accountability to multiple stakeholders, he had said then.

Gopinathan was CFO when his mentor N Chandrasekaran, chairman of the board of Tata Sons, picked him for the top job. The manner of his departure raised several questions, including if he had fallen out with his long-time mentor.

In the days that followed, it was given out that talks were on to find Gopinathan a role within the Tata Group, but that seems to have come to nothing. Times of India reported last week that Gopinathan had taken a senior advisor’s position at the consultancy Boston Consulting Group.

Meanwhile, incoming CEO K Krithivasan has mostly avoided the media glare outside the quarterly earnings press conferences. He has also rejigged his top team a bit, which TCS calls “senior management personnel”, and notably, elevating another top executive Abhinav Kumar as the new global chief marketing officer (CMO).

More women left than men after Covid-19

TCS's global head of HR Milind Lakkad's candid comments in the company's latest annual report, which was released in June, put a spotlight on how a domestic “reset” has come in the way of women returning to work in the IT industry. TCS saw a marginal dip in the overall proportion of women in its workforce from 36.2 percent at the end of FY20 to 35.7 percent at the end of FY23.  Infosys, over the same period, saw a 160-basis point increase to end FY23 with 39.4 percent of its workforce consisting of women.

More women had left in the year past, Lakkad said in an interview in the company’s FY23 annual report. He saw this as “unusual”, as attrition of women had been lower or similar to that of men in the past. “Intuitively, I would think working from home during the pandemic reset the domestic arrangements for some women, keeping them from returning to office after everything normalised,” he said, while TCS didn’t break down specific numbers.

At the time, women occupied 23 percent of leadership positions at TCS, and made up 38 percent of the company’s net hires.

Jobs for bribes

In October, TCS concluded an internal investigation of two jobs-for-bribes whistleblower complaints, the company told the stock exchanges in a statement. Based on the probe's findings, TCS sacked 16 employees and moved three others. There was no fraud by or against the company and no financial impact, TCS said in the statement. The company is adding more governance measures to its processes in dealing with vendors of contract staff.

An article by Mint in June brought the investigation to light. A week later, at the company's annual general meeting of shareholders, Tata Group Chairman N Chandrasekharan confirmed that an investigation was on based on two whistleblower complaints that had been received in February this year, one pertaining to India and the other in the US. We learned that this was about certain company executives favouring certain firms that supplied business associates in return for bribes, which at that point had not been quantified.

The staff involved were from a team called the Resource Allocation Group or the Resource Management Group, dealing with some 1,000 staffing firms that provided business associates in 55 markets.

TCS hasn't provided details about the involvement of the three who remain in the company but have been moved to different roles. Six vendor entities, their owners and affiliates have been debarred from doing any business with TCS.

Also listen: TCS concludes jobs-for-bribes investigation, sacks 16 employees, moves three others

WFO, transfers and dress codes

And even as TCS mandated that employees return to office, NITES, a union in Pune seeking to organise India's 6 million-plus IT and BPO workforce, circulated a letter on November 15 blaming TCS for asking some staff members to accept quick transfers to various centres. Sources within the company told Forbes India that the company itself hadn't seen any serious complaints.

With life returning to normal, more or less, post Covid, the large IT companies have all mandated some form of return to office, Kamal Karanth, co-founder of staffing firm Xpheno pointed out in a chat with Forbes India. And in tandem, “the resistance from employees has also increased,” he says.

Today IT job openings are at about a third of what they used to be 18 months ago, Karanth says. So, employees have fewer choices, and as to the employers they find themselves in a space where their employees are across the country and they are unable to bring them to their nearest hubs, he says. “No surprises there that they are forcing them.”

That said, these are global companies, and they wouldn’t do anything in a non-compliant way, he adds. There are also logistical headaches, like not having enough real estate in place, as a lot was given up during Covid. Remember, the industry added more than half a million workers during the peak of hiring 18 months ago, he points out. And there have also been instances in various companies where new recruits have seen their onboarding deferred until the office space is sorted out. And with the largest IT companies, it is a reality that the employees are coming from 600 districts, Karanth says. “So, definitely some friction, some heartache” is to be expected.

TCS also made some headlines, when along with the return to office mandate, employees were also reminded to adhere more closely to a formal dress code. The detailed rules, according to media reports, include full-sleeved shirts, trousers, neutral colours, knee-length kurtas, saris and so on.

HR head Lakkad has said in the past that the return-to-office is important because an entire generation of youngsters was hired during Covid, ¬and they have to be indoctrinated in the TCS culture. Add the long kurtas to that?

Also listen: Are corporate dress codes relevant in 2023?

IP theft allegations, again

On a more serious note, the jury in a law court in Texas, US, recently decided that TCS was in the wrong, in a case in which it was alleged that the company employees stole code from a competitor. The jury decided in favour of Computer Sciences Corporation (CSC), the company that brought the litigation against TCS, and awarded a total of $210 million in fines against TCS, The Register reported on November 24. TCS will likely appeal.

According to the verdict, the jury agreed that TCS had “wilfully and maliciously” misappropriated both source and confidential documentation by “improper means”. The fine consists of $140 million in damages, and $70 million for TCS's “unjust enrichment”, according to The Register.

The complaint was filed in April 2019 with respect to CSC's Vantage-One and CyberLife software platforms, according to The Register. CSC had licensed these software platforms to Transamerica Corp, an insurer to which TCS and its US subsidiary were providing services. CSC pointed to another lawsuit that TCS ultimately lost, against a company called Epic Systems, to say that this wasn’t the first time the Indian company had stolen intellectual property.

In that case, which it had been fighting from 2014 when Epic Systems started the litigation, TCS was first found guilty by a jury in 2016 in a lower court. The initial penalty was $940 million, according to Hindu Business Line. As the case threaded through the US judicial system, the fine eventually came down to $140 million in compensatory damages.

“The United States Supreme Court on November 20, 2023, rejected the company’s petition to file an appeal against the orders passed by the US Court of Appeals, 7th Circuit, which confirmed the punitive damages award of $140 million passed by the District Court of Wisconsin,” TCS told the stock exchanges in Mumbai on November 21.

TCS will make a provision for the balance amount of $125 million as an “exceptional item” in its current quarter, the company said in the statement.