‘Infy Chairman Should Step Down’
There is no disconnect between Vishal Sikka and the founders... there is disconnect between the board and the founders... the communication channel has broken
V Balakrishnan, former chief financial officer and a shareholder in Infosys, has said chairman R Seshasayee should quit and the board should directly engage with the founders to address their concerns around corporate governance and disclosures. In an interview to Romit Guha, Balakrishnan took pot shots at CEO Vishal Sikka, saying the transformation that was supposed to happen is not seen on the ground. Edited excerpts:
What's happening at Infosys? I think the Infosys board has been a big letdown. When large shareholders — who own a substantial stake in the company, who are iconic founders, and who have built the company — raise certain governance issues, they should be effectively addressed. They have failed to address that, and allowed the issues to linger on for so long that it has to come to this stage. See what happened in Cognizant. A large shareholder writes a letter, the board directly engages with them, changes the board, changes the strategy and move on. That is what the Infosys board should be doing.
What was the trigger for this concern for the founders? Multiple things…There was some large compensation paid to employees when they left the company — the CFO, the general counsel. And the way they increased Vishal Sikka’s salary without any explanation.
Culture is very important for a company. If culture is gone, then everything is gone. That is why the founders engaged with the Board and told them certain things. But they did not address those issues.
Are you saying the board has failed to uphold the culture of Infosys? Exactly. None of the board members have any history with the company. They don’t understand the legacy. Infosys was the golden standard for governance and disclosures in the country. If you look at the last two years, the disclosure levels have been bad. Culture, the value systems are getting diluted. But why are founders interfering with a professional board? No. This is not a fair argument. Founders are not saying your strategy is wrong or Vishal Sikka is bad. What founders are saying is corporate governance is bad. If you bring in a professional CEO, he has to be given a free rein. The founders have never interfered in what Vishal is doing. This is an issue between the board and the founders.
This seems to be similar to what has happened at the Tatas — the founder-professional management disconnect? No. I don’t think there is any disconnect between Vishal Sikka and the founders. I think there is a disconnect between the board and the founders. Even the communication channel has broken. Why do you bring in a law firm to negotiate between the founders and the board? It’s a stupid thing to do. I have suggested that the chairman should step down, because ultimately all the responsibility lies at the door of the chairman, bring in an interim chairman and then talk to the large shareholders that is the founders, address the concerns. If required change the Board and move on.
Can you elaborate on point of disconnect between Mr Sikka’s salary levels and that of employees? You suddenly increase the CEO’s salary by 55-60%, whereas the rest of the salary levels of employees have not gone up. And you don’t disclose it to the stakeholders on what basis the variable salary has been paid. They don’t know what targets is the variable salary linked to. If you just say revenue target of $20 billion by 2020 is linked to his salary, that’s not enough. How are you going to achieve it? Where is the plan?
Where do you think this confrontation is headed? The Board should so some maturity in handling an issue like this. I think some good sense will prevail.
Do you think this could be as bitter as the Tata-Mistry fallout? The Tata thing is different. There, I think they lost confidence in Mistry in the way the group was being steered. There, it was a performance issue. Here, there’s no issue with the CEO. It’s with the board.
Have the founders engaged a law firm to deal with the issue? I don’t think we will. We are more mature people.
How do you rate the performance of the company in the past three-four years? Performance has been reasonably ok. But as an outsider, we don’t get clarity on the way forward. There was a lot of talk about transformation. But we have not seen any big change happening on the ground. And even the acquisitions which have been done with a lot of fanfare, have not delivered much. And giving a vague $20 billion target of 2010, it looks highly unachievable at this point of time.