Op­pen­heimer Backs Sikka

IT firm is a pub­licly listed co, no longer the founders’ co, says fund

The Economic Times - - The Infosys Saga -

Jochelle Men­donca & TV Ma­halingam

Ben­galuru: Op­pen­heimerFunds, In­fosys’ third largest institutional in­vestor, which con­trols about 2.7% of In­fosys share­hold­ing, backed CEO Vishal Sikka and said the founders needed to ac­cept that the IT firm was pub­licly listed and was no longer ‘their’ com­pany.

This is one of the rare times that an institutional share­holder has come on the record to sup­port a pro­fes­sional CEO in In­dia, amidst con­cerns that the pro­mot­ers of the com­pany are up­set with gover­nance.

“As large, long-term in­vestors in In­fosys, we want to ex­press our sup­port for the man­age­ment team of Dr. Vishal Sikka. There have been loud, can­cer­ous ru­mours of in­ter­ven­tion by non-ex­ec­u­tive founders in the man­age­ment team,” Justin Lev­erenz, port­fo­lio man­ager at Op­pen­heimer De­vel­op­ing Markets Fund, said in an open let­ter to In­fosys’ board. Op­pen­heimer sent ET a copy of the let­ter.

“The bot­tom line is that, in our opin­ion, Dr. Sikka has achieved much in his ten­ure as the first non­founder Chief Ex­ec­u­tive Of­fi­cer. Af­ter many years of in­ter­nal volatil­ity and com­pet­i­tive un­der­per­for­mance, it is en­cour­ag­ing to see that Vishal has sta­bilised the core and ar­tic­u­lated a clear — and ap­pro­pri­ate — long-term strat­egy to help In­fosys thrive amidst in­dus­try dis­rup­tion,” Lev­erenz said. Op­pen­heimerFunds Inc acts as an investment ad­viser to cer­tain investment funds and ac­counts that col­lec­tively own about 2.7% of In­fosys. The hold­ing is val­ued at over $900 mil­lion.

“We would strongly en­cour­age the Board of Di­rec­tors to re­strain di­vi­sions in the firm and con­tain in­ap­pro­pri­ate in­ter­ven­tions by non-ex­ec­u­tive founders. Let Vishal do what he was hired to do, with­out dis­trac­tions. And ap­praise him on his ef­forts,” reads the let­ter.

ET has re­ported that In­fosys’ founders have been un­happy with the board and what they con­sider a vi­o­la­tion of ‘core In­fosys val­ues’. ET has re­ported that the founders tapped a Mum­bai law firm last year to eval­u­ate a po­ten­tial co-chair­man for the board. But the idea fiz­zled out as non- ex­ec­u­tive chair­man R. 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.

Lev­erenz also asked the board to clar­ify the role of the non-ex­ec­u­tive founders.

“With all def­er­ence to their enor­mous con­tri­bu­tions, we also be­lieve that non-ex­ec­u­tive founders need to come to grips with the re­al­ity that this is a pub­lic com­pany. It is no longer their firm…. The Board needs to clar­ify the ap­pro­pri­ate role of non-ex­ec­u­tive founders of the Com­pany,” he added.

As of De­cem­ber 31, 2016, the nonex­ec­u­tive founders (pro­moter and pro­moter group) owned 12.8% of the Com­pany’s out­stand­ing shares. Op­pen­heimer has been a longterm in­vestor in In­fosys, in­clud­ing dur­ing the 2012-2014 pe­riod when the com­pany sus­pended its prac­tice of giv­ing guid­ance and faced a slew of man­age­ment ex­its. Sikka was brought in to turn around the IT firm, which had lost its bell­wether ti­tle to TCS.

“We have been sig­nif­i­cant in­vestors in In­fosys for more than a decade. Dur­ing this pe­riod, we have wit­nessed patches of un­usual tur­moil in man­age­ment and vi­sion at In­fosys, with share price per­for­mance sig­nalling share­holder ex­haus­tion with in­ter­nal dis­so­nance, man­age­ment volatil­ity and in­ter­nal in­trigue,” Lev­erenz added.

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