You are here: Home » Companies » Infosys vs founders » News
Business Standard

After Vishal Sikka's exit, Infosys faces recruitment headache

Board also blamed Narayana Murthy for exit and for undermining Sikka's efforts to transform Infosys

Sankalp Phartiyal & Nivedita Bhattacharjee | Reuters  |  Mumbai/Bengaluru 

Vishal Sikka
Vishal Sikka

The dramatic departure of as chief executive officer (CEO) of Infosys, following a months-long public battle with the tech giant's founders, has left the company with another messy problem: How to find someone willing to replace him.

With the boardroom row still simmering, the pressure will be on to do that fast. The company's last CEO hunt in 2014 was a major challenge.

Sikka, the eventual choice who was plucked from a top job at SAP, was the first chief appointed from outside the group of founders. His brief was to turn around a faltering business.

Three sources familiar with internal discussions three years ago said they expected an even tougher challenge now.

"It was extremely hard to find an external candidate last time, and the spat is going to make the job even more difficult now," said one of the sources.

"I think, there is very little chance there will be an external candidate."

The new boss will be taking on a company in better shape than it was in 2014: Sikka has led efforts to diversify away from basic IT (information technology) outsourcing services into more lucrative new areas, such as cloud, automation and artificial intelligence.

Infosys' share price surged 22 per cent between August 1, 2014, when Sikka took office, and Thursday, outperforming the broader Nifty IT index, which gained 6.3 per cent in the period.

But his successor will also join during one of the most turbulent patches ever for the $150-billion Indian IT services sector. The industry is facing squeezed margins, Brexit question marks over European businesses, and uncertainty in the US, thanks to visa policy changes.

Infosys' chairman, R Seshasayee, told reporters the company would not look for a major change in culture or strategy and was confident it could still attract talent.

"There may be some people who get excited by these kinds of challenging situations," said a senior source. "But anyone who is comfortable and doing well will think long and hard before taking this job."

The company has not publicly identified potential successors, though the interim CEO Pravin Rao, Chief Financial Officer Ranganath D Mavinakere, Deputy Chief Operating Officer Ravi Kumar S and Mohit Joshi, the head of banking, financial and insurance services, are among the top internal candidates, according to the company source.

Staying On

In an unusual move, the board of India's No. 2 IT services company accepted Sikka's resignation but named him executive vice-chairman until a replacement was found. Rao reports to him.

The board also blamed — one of the company's co-founders, a heavyweight in Indian business and one of the most vocal critics of the board — for the exit and for undermining his efforts to transform

That leaves any successor likely to continue to face a board at odds with powerful minority shareholders: The men who created the company and transformed outsourcing four decades ago.

and its founder executives, led by Murthy, have been at odds since February. Sore points include increases in Sikka's salary, what they argue was the overpriced acquisition of the Israeli automation firm and severance packages offered to some executives.

While the board has consistently backed Sikka publicly, some shareholders like Avinash Vazirani of Jupiter Asset Management say directors have not done enough to build investor confidence.

"I think, the question is whether the board enjoys the support of the investors and shareholders," Vazirani said on an investor call on Friday.

"There has clearly been a failure on the part of the board to get the company in the situation where it is now." Infosys' co-chair, Ravi Venkatesan, told investors on Friday the board would seek to settle the dispute before making permanent changes at the top.

"We will have to find ways to put this decisively to bed so that by the time we have a couple of viable candidates, there is more stability," he said.

Yet the abrupt departure of the man seen as an innovator in the global software industry has raised fresh questions over Indian corporate governance practices.

India will be the battleground for many such corporate tussles as companies transition from founder- and owner-led companies to entities run by professional CEOs and boards, said Shriram Subramanian of InGovern, a shareholder advocacy group.

The public row at is reminiscent of Cyrus Mistry's unceremonious ouster in November as boss of Tata Group: Another professional CEO exiting over differences with a key shareholder — in that case, the Tata family patriarch,

"A belligerent attitude towards the founders of an iconic company will keep friction levels high and the search for an external CEO tough," Ankur Rudra, an analyst with CLSA, warned in a note.

First Published: Sun, August 20 2017. 00:07 IST