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Innuendo at Infosys PDF Print E-mail
Monday, 13 February 2017 00:26
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Shobhana's edit 

Some decisions look iffy but the all-out war hits Sikka

 

That Infosys should be rocked by discord with founders making public their displeasure over corporate governance at the firm is unfortunate. Any concerns about the mismanagement by the board, or the remuneration committee, should have been addressed in private. Dissenting – or venting – in public is unprofessional. Indeed, hinting about the possibility of the severance payments being ‘hush money’ are serious and Infosys founder NR Narayana Murthy would have done well not to have talked about this in the media. To be sure, the board needs to explain why the severance payout for former CFO Rajiv Bansal – and others – was so much higher than usual. Murthy must be true to his current status, that of a mentor and father figure for the IT industry. Lamenting the lack of corporate governance or discussing the concerns of employees in public helps no one, it only vitiates the atmosphere.

 

There is a professional CEO in place to run the business and he must be given a free hand. Employees must approach Vishal Sikka with their concerns and Murthy must allow Sikka to deal with them. Perhaps Sikka doesn't run as tight a ship as his predecessors did but as long as he delivers on his targets – which are incredibly tough – there should be no carping about his remuneration. The CEO has enough to deal with given this is arguably the most challenging time ever for the sector given events such as Brexit and the new visa policies in the US which will work against Indian IT services providers.

 

By all accounts institutional shareholders have appreciated Sikka's efforts to revamp Infy's business model to make it a stronger and more relevant player. Indeed, he should be congratulated for having put Infosys back on track; under the watch of two of his predecessors – incidentally both founders – Infosys' performance had slipped badly with the stock price (adjusted for splits/bonus) slipping to levels of Rs 740 in June 2014. In the two years after Sikka took over in August 2014, the Infosys stock gained 71%, hitting a high of 1,267 in June 2016.

 

Few shareholders questioned Narayana Murthy for having appointed certain founders to the top job; they were clearly not competent for the role and were unable to build on Infy's leadership in the marketplace even when the environment was far less challenging than it is today. Murthy should leave the running of Infosys to the CEO and the board and respect their decisions. To be suggesting – if at all he did – that his idea of a visa-independent global delivery model is not being pursued actively by the current management is unfair. Indeed, the founders of Infosys, who together hold just short of 13% of the company's equity, must learn to let go; they are welcome to their rights as shareholders. Some of them have been asking for the cash on the company's books – $5 billion or so – to be returned by way of a dividend or a buyback. This paper has argued that the cash is better off in Infy's bank account and will come in handy if an acquisition is to be made. More than ever before, the company needs a war chest to combat increasingly tough times. 

 

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