US-based iGate fires CEO after sex harassment claim

US-based outsourcer iGate says it has fired chief executive Phaneesh Murthy, one of India's best-known IT businessmen, for failing to report a relationship with an employee, the second such case he has faced.

The statement by the Fremont, California-based IT and outsourcing company, came after an investigation into "a claim of sexual harassment" against Murthy and marked the second time he has been entangled in such a situation.

In 2002, he was forced to quit India's second-biggest software exporter, Infosys, following a similar claim.

The latest probe looked into a relationship Murthy had with a "subordinate employee" at iGate, the statement, dated Monday, said.

The "outside" investigation "has reached the finding that Mr Murthy's failure to report this relationship violated iGate's policy, as well as Mr Murthy's employment contract", the statement said.

"The investigation has not uncovered any violation of iGate's harassment policy," it added, paying tribute to "the significant contributions" Murthy made over the past decade to establish iGate as an industry IT leader.

Murthy's exit was not related in any way to iGate's financial performance which remains "strong", added company cofounder Ashok Trivedi. iGate gets the bulk of its revenues from the United States.

"The board deliberated extensively on this matter, said iGate board cochairman Sunil Wadhwani. "However, as a result of this violation of iGate policy, we asked Mr. Murthy to step down."

Murthy was quoted on India's Economic Times newspaper website as saying the allegations were "completely baseless" and he would fight harassment charges "vigorously" if they went to court.

He also said he had told the company of his "personal relations" with the colleague in question.

Murthy had been seeking recently to shake up the IT sector with a new "outcome-based billing" strategy to challenge India's outsourcing industry's traditional method which charges for "time and material" rather than results.

The old model of outsourcers getting paid based "on a flawed metric of effort without any risk being shared is dying in today's times", he has asserted.

The iGate board appointed industry veteran Gerhard Watzinger, 52, as interim president and chief executive with immediate effect.

In 2003, Infosys agreed to pay $3 million in an out-of-court settlement after his personal secretary filed a sexual harassment charge against its ex-marketing head Murthy, who was the firm's highest paid employee when he resigned.

In that case, Murthy denied involvement with the complainant.

Krishnakumar Natarajan, chairman of outsourcing industry body NASSCOM, said in televised remarks that iGate's "quick and decisive" action to dismiss Murthy was right for a sector which prides itself on the "highest standards of governance".