Infy-nite Trou­ble at IT Bell­wether Ef­forts on by well-wish­ers to douse flames of dis­cord in In­dia’s 2nd-largest IT ser­vices com­pany

The Economic Times - - Front Page -

Jochelle Men­donca & TV Mahalingam

Ben­galuru: Con­certed ef­forts are un­der­way to en­sure that the trou­ble brew­ing at In­fosys, In­dia’s sec­ond-largest soft­ware ser­vices com­pany, does not flare out of con­trol, ac­cord­ing to two peo­ple aware of the de­vel­op­ments who also said that among those in­volved is a prom­i­nent in­vestor in the com­pany — Babu­raj Pil­lai.

Re­ports of dis­putes over “in­ter­nal gov­er­nance is­sues” be­tween some of the com­pany’s founders and a man­age­ment keen on chart­ing a new path have spurred ef- forts to bro­ker peace by the Singapore-based fund man­ager as well as other in­flu­en­tial peo­ple, said the sources cited above.

Pil­lai, the founder of in­vest­ment firm Arohi Cap­i­tal, met with cofo- un­der NR Narayana Murthy and chief ex­ec­u­tive of­fi­cer Vishal Sikka late last year, ac­cord­ing to peo­ple aware of the talks. “Pil­lai met with both of them to try and cre­ate com­mon ground. He does not want Sikka to be forced to leave and he also does not want Murthy to feel as though his voice is not im­por­tant,” said one of the peo­ple aware of the dis­cus­sions.

Pil­lai did not re­spond to an email seek­ing com­ment. There was no re­sponse to mes­sages left by ET on his firm’s tele­phone num­ber.

“With re­gard to con­cerns on gov­er­nance be­ing dis­cussed in the me­dia, we would like to re­it­er­ate that all de­ci­sions have been made bona fide, in the over­all in­ter­est of the com­pany, and that full dis­clo­sures have al­ready been made thereon,” In­fosys said in a state­ment.

In­fosys co­founders Murthy and Nan­dan Nilekani did not re­ply to emailed queries. Co­founder Kris Gopalakr­ish­nan de­clined to com­ment, say­ing, “As a pol­icy, I don’t com­ment on In­fosys at all.”

To­gether, In­fosys’ pro­mot­ers own just un­der 13% of the com­pany.

Pil­lai had pre­vi­ously writ­ten to In­fosys’ board in 2013, ask­ing it to bring Murthy back. Af­ter a brief stint at the helm, Murthy stepped down when the com­pany ap­pointed Sikka as CEO in 2014.

This time round, Pil­lai has a wide gap to bridge. Sources with knowl­edge of the pro­moter group’s think­ing say that some founders are up­set with what they sees as “in­ter­nal gov­er­nance is­sues” and the in­abil­ity of the board to guide the com­pany. Trou­ble has been brew­ing for over a year and the large sev­er­ance paid to the com­pany’s for­mer chief fi­nan­cial VARANI SAHU of­fi­cer Ra­jiv Bansal, dis­closed in 2016, and Sikka’s re­vised $11 mil­lion com­pen­sa­tion in the same year brought mat­ters to a head. Some of the pro­mot­ers were also up­set with the ap­point­ment of Pu­nita Ku­mar-Sinha, a prom­i­nent in­vest­ment banker and wife of Union min­is­ter Jayant Sinha, as an in­de­pen­dent di­rec­tor. But at the heart of the grow­ing dis­pute be­tween some of In­fosys’ pro­mot­ers and the man­age­ment is what the founders be­lieve to be a vi­o­la­tion of “core In­fosys val­ues”. Some of the founders have held the board re­spon­si­ble for what they per­ceive to be its in­abil­ity to en­force gov­er­nance norms.

In July 2016, one of In­fosys’ prom­i­nent pro­mot­ers reached out to a top le­gal pro­fes­sional in Mum­bai. The agenda: to hunt for a co-chair­man for In­fosys. This, de­spite the fact that R Se­shasayee had been serv­ing as In­fosys non-ex­ec­u­tive chair­man for just a year, since his ap­point­ment in June 2015.

“The idea was to look for some­one who un­der­stood the core val­ues of In­fosys,” said an ex­ec­u­tive aware of the mat­ter. A few names were thrown up as can­di­dates, in­clud­ing a for­mer In­fosys fi­nance hot­shot and a re­tired founder. But the idea fiz­zled out as Se­shasayee stepped down on July 28 as non-ex­ec­u­tive vice-chair­man of Ashok Ley­land — a post he had held since 2011 — to fo­cus more on In­fosys.

In Oc­to­ber, DN Prahlad, an old Infy hand who served in the com­pany be­tween1986 and 1998, was brought on board as an in­de­pen­dent di­rec­tor.

In­fosys has been bat­tling con­cerns that it has two power cen­tres, with serv­ing se­nior ex­ec­u­tives some­times be­ing called upon to brief a few pro­mot­ers in­for­mally about the work­ing of the com­pany, ac­cord­ing to an In­fosys ex­ec­u­tive who de­clined to be iden­ti­fied.

“The board re­ceives sug­ges­tions and in­puts from var­i­ous stake­hold­ers, in­clud­ing pro­mot­ers, which are eval­u­ated with due im­por­tance. The com­pany will con­tinue to be guided by the over­all in­ter­ests of all stake­hold­ers,” In­fosys said in a state­ment.



In­dus­try ex­perts say the sit­u­a­tion is not yet past the point of no re­turn.

“The end goal is the pro­mot­ers, the board and the man­age­ment should be aligned. I don’t think the sit­u­a­tion is irredeemable. I think if the founders air their prob­lems, this could still be re­solved. This isn’t like the Tata case,” Shri­ram Subramanian, man­ag­ing di­rec­tor of share­holder ad­vi­sory firm InGovern, told ET. But he added that the com­pany would have to start be­ing more trans­par­ent about its de­ci­sions to let go of its chief com­pli­ance of­fi­cer in De­cem­ber and its sev­er­ance poli­cies.

In the past month, In­fosys has been mak­ing changes to its dis­clo­sure poli­cies, its in­sider trad­ing pol­icy and has bulked up its cor­po­rate gov­er­nance hand­book. The com­pany’s pre­vi­ous in­sider trad­ing pol­icy stated that pre-clear­ance of trad­ing rules did not ap­ply to any trade with a value of less than Rs 5 lakh pro­vided that the des­ig­nated per­son was not in pos­ses­sion of un­pub­lished price-sen­si­tive in­for­ma­tion. In the com­pany’s up­dated in­sider trad­ing pol­icy, that min­i­mum value has been deleted, im­ply­ing that all trades — re­gard­less of size — have to be pre-cleared.

Last month, In­fosys dis­closed that its in­de­pen­dent di­rec­tor Ravi Venkate­san had in­ad­ver­tently vi­o­lated its in­sider trad­ing pol­icy while its trad­ing win­dow was closed. The com­pany has also cre­ated a ded­i­cated phone line for whistle­blow­ers.

In­fosys shares closed down 1% at Rs 934 on the Na­tional Stock Ex­change as in­vestors wor­ried about the fall­out of the dis­pute.


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