Will battle mark the end of new Infosys under Sikka?
Infosys Ltd’s founders, led by NR Narayana Murthy, have blown the bugle in their 10-month old fight to control the board of India’s second largest software services firm. Many are worried Infosys’s run under Vishal Sikka, its first nonfounder chief executive officer, may end sooner than later.
Late on Thursday, Infosys sent a seven-paragraph statement, announcing that the company recently appointed Cyril Amarchand Mangaldas, a law firm it described as corporate governance experts, to evaluate inputs the company receives from promoters and other external stakeholders and make recommendations to the board.
This development was strange, given that Infosys itself denied in the statement any corporate governance lapses at the company.
“If you have not done anything wrong, then why in the first place appoint a law firm or corporate governance experts,” asked a Mumbai-based equity analyst on condition of anonymity.
Murthy, in an interview to The Economic Times published on Friday, expressed his displeasure on some decisions made by the board and was scathing in his remarks on two of the seniormost board members of Infosys, nominations and remuneration panel head Jeffrey Lehman and non-executive chairman R Seshasayee.
Murthy questioned the rationale behind Infosys agreeing to pay a generous severance of ₹17.38 crore to its former chief financial officer, Rajiv Bansal, and said “they (Lehman and Seshasayee) must accept responsibility and atone for it.”
On another question of how Infosys’ board could redeem its credibility, Murthy said: “First is for the chair of the nomination and remuneration committee (Lehman) and the chair of the board (Seshasayee) to accept their mistakes and show contrition.”
On Friday, Mint reported that Infosys founders had expressed their displeasure with Seshasayee over some of the board’s decisions and asked him to consider stepping down.
This decision to appoint a law firm, which has worked with Infosys in the past and also has Murthy as a member on its “strategic advisory board”, has made many senior employees and experts interpret it as a victory for Murthy. “Two things are clear. First, of course, some of the founders are unhappy with the board, as they believe some of their suggestions have not been accepted and on what they call as falling corporate governance standards,” said a senior executive at Infosys. “Second, by having a law firm, on which one of the founders is a member of its strategic advisory board, means Murthy emerges victorious. Infosys could have had any law firm to assist but still the CEO and the board accepted this decision.”
The appointment of the law firm, given that Murthy is a member of its strategic advisory board, “is inherently conflict of interest”, said Shriram Subramanian, founder and MD of proxy firm InGovern Research.
“This is also worrying because this means the founders may make the board, which itself had taken a lot of non-transparent decisions, agree to a lot of their suggestions,” said Subramanian.
An email sent to Infosys seeking comment went unanswered.
“The board will see changes, as some of the founders’ demands on getting ‘like-minded’ people will be met,” said a second senior executive on condition of anonymity. “Once you get control of the board, it is a joke to say that CEO can work independently.”
“One thing which is still unclear is why is Vishal continuing at Infosys despite these antics by some founders,” said the first executive cited above. “Is it because Vishal cannot take on the founders and express his unhappiness or Vishal is worried of his future, or has some alleged wrongdoing happened under his watch, which is now is being using as a stick to beat the CEO?”
Infosys continues to downplay any talk of a rift between the founders and the board or the founders and Sikka.
“The company denies any governance lapses alleged by some sections of the media in reports that have appeared in the past few days on purported rifts among founders, the board and the management,” an Infosys statement said. “While the board appreciates and respects inputs from the founders, it is committed to fulfilling its fiduciary responsibility to act independently and in the overallinterestofshareholders.”