Infosys board faces the flak for note on Murthy
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 founder NR Narayana Murthy for CEO Vishal Sikka’s decision to quit.
After the initial days spent digesting news of the CEOs 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 whether R Seshasayee should continue to remain chairman of the board. 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 mis-management by any board of a large listed company in India,” said a former executive vice president of Infosys, on the 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 12.75% stake in the company, vote against the resolution. Infosys’s share buyback 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%), then the buyback could fall apart.
To be sure, the company’s five founders have not yet decided if they will participate in the buyback. But the board’s six-page note, blaming Murthy has upset all the founders.
“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 advisors 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 e-mails seeking comment while another co-founder Kris Gopalakrishnan declined 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.