‘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

The Economic Times - - Companies: Pursuit Of Profit -

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.

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