Is the Infosys board wrong in blaming Murthy?

Experts share their views on the way forward to break the impasse between the founders and the board

Reconstitute the nomination and remuneration committee

 

Shailesh Haribhakti 

 

If I were to trace the genesis of this problem, the two factors that pop out are loss of trust and ego! Massive efforts were made to assure all parties involved that the focus of the company is right and that the sensitivity to governance issue is high! Alas, to no avail! In a very insightful resignation letter, clear reasons were adduced by Sikka. Even the board of Infosys came out solidly and unequivocally in his favour. This, after fully respecting the stature of Murthy, through privileged conversations and other processes to assure the system that no wrong was done. Despite all this bilateral effort, the stand-off persisted. 

 

This is clearly a unique situation and is by no means a reflection on the competence of the Indian governance system to handle succession issues. In fact, through this entire episode, we saw many examples of new practices being experimented with. I, therefore, cannot reach the conclusion that the board blamed Murthy. 

 

Three economic interests are affected here: Customers, employees and shareholders. With the known execution skills and depth of domain knowledge that Infosys has, customers will certainly continue to be delighted. The interim transitional arrangements will be sufficient to maintain employee morale. The solution lies in bringing shareholder democracy to the fore and in using the general meeting of shareholders as the only forum to permanently address this issue. If quickly deployed this process may preserve the forward march of this great company. The actions by Sikka and the board are already in public domain. Discussion and criticism of these are not solution sets. The crying need is for stability to be re- established. 

 

The course I might suggest is a simple four part action plan: (i) Reconsider the constitution of the Nomination and Remuneration Committee (NRC) of the board, to ensure it fully reflects the entire spectrum of interests involved. (ii) Let the NRC recommend a comprehensive slate of directors on whom the entire shareholder base can place their faith and trust. (iii) Let the process for selection of the successor to Sikka be articulated.  (iv) Let the democratic forum of a general meeting drive all these proposals to an agreed consensus. 

The writer is managing partner of Haribhakti & Co.

Boards do not and should not be pointing fingers

Amit Tandon

 

Narayana Murthy has had an unprecedented impact on India’s IT sector: He fashioned the global delivery model for IT services outsourcing from India and, in doing so, established Infosys as an iconic Indian company of its time. 

 

The build-up: Murthy served as Infosys’ CEO from 1981 to 2002, and as its chairman from 2002 to 2011, and again for 17 odd months from June 2013. It was during his short second term that Vishal Sikka was brought in as CEO. The first few sundrenched quarters saw the promoter group enchasing some of their shares, which had run-up some 20 per cent since Sikka came on board.  It was only after that differences with the promoters, none of whom were involved in the company in any executive capacity started to surface, and slowly snowballed. Many developments attracted their ire: Rajiv Bansal’s resignation and his initially undisclosed severance package, an upward revision in Sikka's compensation, the steady resignation of senior people and their severance and the Panaya acquisition — which has dragged on. That two external consultants who reviewed the Panya transaction, and gave the company a clean chit was still not good enough. All through the chorus has been that Infosys has deviated from the governance path that its founders had charted for the company. 

 

The straw: Professionals always weigh where their time is being spent and is it worth it. Public comments from Murthy have been distracting — to a point where the company in its 20-F filing, disclosed distractions from ‘activist shareholders’ as a possible risk to achieving its strategic goals. Sikka's anguish, that the jabbing was endless and increasingly getting personal, led him to resign. The board, as a sign of its own helplessness and its failure to protect its CEO, has apportioned the blame on Murthy. While one may empathise with them, this is unprecedented. Boards do not and should not be pointing fingers. The buck stops with them. Nor does this solve its problems. Having failed to engage meaningfully with its ‘first' shareholder’ in the past, it has just made its job even more difficult.   

The writer is founder and managing director, IiAS