Infosys board under fire for note blaming Murthy for Sikka’s exit
PRESSURE BUILDS UP Large investors, proxy advisory companies, brokerages, top executives question the move
Large institutional investors, proxy advisory firms, brokerages, top executives at the company and some of the company’s 200,000-odd employees have the same question: why did the board of Infosys decide to release the now-infamous sixpage note blaming co-founder NR Narayana Murthy for chief executive officer Vishal Sikka’s decision to quit?
After the initial days spent digesting news of the CEO’s abrupt decision to quit, the events in the run-up, and the consequent ₹33,074-crore loss in market value since Friday, these stakeholders are now asking why the board lashed out at Murthy.
Questions are being asked about whether R Seshasayee should continue to remain chairman. And several investors have written or are in the process of writing to the board asking it to sort things out with Murthy.
“(This is) the biggest mismanagement by any board of a large listed company in India,” a former executive vice president of Infosys said on condition of anonymity. “As a shareholder, I would say the chairman let me down by not performing his fiduciary duties. He could not retain his CEO; nor could he work with an influential group of minority shareholders. To make matters worse, the board went ahead and released a letter blaming someone else for its own mistakes.”
There’s also the real fear that Infosys’s proposed ₹13,000-crore share buyback could be derailed if the five founders, who collectively own a 12.75% stake in the firm, vote against the resolution.
The buyback is a so-called special resolution which needs approval from two-thirds of shareholders. Historically, not more than 70% of shareholders vote for any proposal, and if the founders vote against the resolution (and the overall vote remains at around 60%), the buyback could fall apart.
To be sure, the company’s five founders have not yet decided if they will participate in the share repurchase. But the board’s sixpage note blaming Murthy has upset them. “It was pathetic. It was offensive and not befitting the board of a company like Infosys,” said one of the founders on condition of anonymity. “If the board had so much confidence in Vishal, why has it been talking to others, including Mr Murthy, and complaining about Vishal’s performance as a CEO?”
Murthy wrote in a letter dated August 9 to some advisers that Infosys co-chairman Ravi Venkatesan and two other independent directors had told him that Sikka was not CEO, but CTO material. The board’s six-page release on Friday blaming Murthy for his “continuous assault and misguided campaign” against Sikka has caused heartburn among the five founders.
Co-founders Murthy, Nandan Nilekani, SD Shibulal and K Dinesh did not respond to emails seeking comment. Kris Gopalakrishnan, another co-founder, declined to comment. “The resolution for the share buyback should get 75% favourable votes of the total votes polled,” said an Infosys spokesperson, who declined to comment on other issues raised in this story.
“Until now, the promoters only stayed away from voting over some of the resolutions that came for voting. I won’t be surprised if, at some time the promoters also decide to vote against the board’s decision because they have lost their trust in the board,” said another senior Infosys executive who spoke on condition of anonymity.
Murthy has been meeting heads of large institutional investors, mutual funds and a few brokerages over the past month to build pressure on the board, the second Infosys executive added.
A number of executives and employees, including senior leaders at the company, have reached out to the Infosys board over the past two days, pressing the board for an early resolution to the ongoing tussle and expressing unhappiness over the board’s decision to issue the six-page statement against Murthy.