Way out for Infosys: Sebi or corporate affairs ministry should intervene

Though the skirmishes have been going on for some months, the real war at Infosys may have just begun. After adopting a placatory stance initially, the company’s board on Friday launched a frontal attack on co-founder N R Narayana Murthy, blaming him for putting Vishal Sikka, former managing director and chief executive officer, under a “continuous assault”, which led to his abrupt exit. This is a serious allegation against an individual whose voice still carries a lot of weight as far as public perception is concerned. Predictably, Mr Murthy hit back, saying while he would give a detailed response, he did not want the Infosys board to drive the institution “to death”. Such strong positions mean that the face-off between the board and the company’s founders is likely to continue and Mr Sikka’s exit (regrettable, because he had done well for the company) may not end the story.

While Mr Murthy’s constant barbs against the board and the management can be unsettling for any company and suggestions have been made that he should not have made a public spectacle of his angst, it would seem that there are still unanswered issues about proper disclosure, and the board may be divided on the matter. This becomes evident from conflicting statements made by a board member who first said a formal role for Mr Murthy in Infosys was welcome and then took a U–turn just a few days later by saying there was no such proposal.

At the centre of the storm is the $200-million acquisition of Panaya in 2015. In February this year, anonymous whistle-blower complaints claimed that the acquisition was overvalued. It was also alleged that the unusually high severance package to former chief financial officer Rajiv Bansal, who was not in favour of the acquisition, was not disclosed at that time, and that the company's legal head had withheld information from the board. Under pressure, the board had halted Mr Bansal’s severance payment. Infosys has indeed published the conclusion and summary finding statement of the investigation by Gibson Dunn & Crutcher in June, where the law firm said it found no evidence to support the whistleblower’s allegations. The disclosure of the full investigation report, as demanded, may be impossible because this might violate confidentiality agreements, but it’s hard to see why the board wouldn’t want to put some more evidence in the public domain in order to firmly kill the issue. Equally, Mr Murthy’s lack of faith in the entire Infosys board, and in the law firms that have gone into the issue, implies a sweeping denunciation that is not warranted.

It is hard for any company to continue in this situation for long. For instance, given the widening trust deficit between the board and the founders, it is being suggested that only an insider can become the next CEO. This is not a good position to be in. With the principal players having drawn lines in the sand, and acrimony having developed, someone from outside must intervene to get this sorted out, instead of letting the conflict fester. Either the Securities and Exchange Board of India or the ministry of corporate affairs could step in, or nominate someone, to take a look at the full facts and report to the company’s shareholders. Things can’t be allowed to remain the way they are as Mr Murthy and his strained relations with the board have become a big risk factor for Infosys, as the company alluded to in a statutory filing. Infosys is too valuable a company to become a victim of personal egos, or a war between the board and the founders.