Is Infosys suffering from founders’ hangover?

The ongoing spat between Infosys board and with some of its key founders raise many questions. Is it an assault on the independent CEO and the board who chose to radically transform the organization from its legacy-centric thinking and processes or has the board breached the values and conventions that were built brick by brick by the Infosys founders?

These are some of the questions being asked by corporate India when they reflect on the alleged corporate governance lapses in India’s second biggest software services exporter

During the formative years and well through its evolution as an IT services behemoth, Infosys by opting the tag-line: “Powered by Intellect, Driven by Values” has raised its bar significantly over the years. While we do not see this tag-line anymore, but this in a way epitomizes the legacy left behind by the founding fathers of this company.

When Sikka took over the reigns of Infosys as CEO in 2014, it was for the first time an outsider took charge of Infosys’ rank and file and with great expectations of taking Infosys to the new normal. His aspirational target of $20 bn in revenues by 2020 and making Infosys agile whether it is HR or Technology or Processes or Innovation or Culture was well received.

But this was the story till about end of 2016. That Infosys is in the hands of a dynamic CEO executing a bold new strategy received its first dent when Infosys founder Narayana Murthy raised a red flag asking disturbing questions on high compensation for Sikka and pondered over the severance package ( Rs 17 crore plus) made to ex-CFO Rajiv Bansal.

The tussle between Infosys founders and the top management is very much out in the open. Infosys till now is seen as one of the guardians of upholding corporate governance in India. But this outpouring by someone like Murthy has really cast a shadow on its board and the board has some explaining to do on why such hefty severance package to Rajiv Bansal.

But industry observers feel that this issue has become a double-edged sword for the company. On the part of Murthy, he mentioned that he is not taking back his observations made by him on the corporate governance lapses on the part of the Infy board and by stating that he made it clear that he is not having confrontation either with the board, rather he is merely trying to establish transparency and accountability. Even Murthy went on to the extent by saying that Infosys board and its members are people with high integrity, but he added a caveat by saying ‘sometimes even good people make mistakes’.

But as of now on the part of the founders, the rhetoric seems to have toned down, when Murthy said that “I will stop now and leave it to the board.”

Meanwhile, R Seshasayee, Infosys Board Chairman has observed that the board is on the road to executing Vishal Sikka’s roadmap and the compensation and severance pay has been made with necessary disclosures.

Given that, why are the founders raking up this issue now and Murthy by taking a dig at corporate governance lapses reflects poorly on company’s board. Clearly, there is an element of ‘trust-deficit’ that is creeping in.

LARGER ISSUES

While many analysts have spoken about this, but the most damning one came from Oppenheimer Funds, which has about 2.7% of Infosys shares. In a report that was first published by Economic Times, it stated that Oppenheimer Funds fully backs Vishal Sikka and in a letter to Infosys board, Justin Leverenz, portfolio manager of Oppenheimer Developing Markets Fund wrote: “We encourage the Board of Directors to reaffirm support for Dr. Sikka's authority to execute while discouraging internal dissonance. After many years of organizational chaos, it is time for the Board to get behind their designated CEO and let him execute”. The letter in entirety can be found here.

This is a clear message to the founders that Infosys is no longer their company, it’s owned by the public and voicing dissent like this might dent the company’s credibility in the global markets.

What is more surprising is the absolute ill-timing of this whole issue. Uncertain economic conditions and the change of political guard in the US have created a high degree of jitteriness regarding the work permit visas to the US and on IT outsourcing as a whole. A conflict between the founders and the board does not augur well for the company at this point in time.