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Infosys board responsible for the mess

By B S Raghavan
August 19, 2017 09:43 IST
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'The meanness of the board statement apart, it nowhere answers the most fundamental and damaging aspects of the deteriorating work culture among top company executives to which Narayana Murthy had been repeatedly drawing attention,' says B S Raghavan, the distinguished civil servant.

Vishal Sikka, left and, Infosys' co-founder N R Narayana Murthy

The malodorous controversy that had engulfed the country's iconic IT enterprise, Infosys, ever since its co-founder, N R Narayana Murthy, went public in February 2017 with his strong disapproval of its straying from the austere and noble traditions set by him and other co-founders has now reached a climax, culminating in the resignation of the chief executive, Vishal Sikka.

He has chosen to leave after kicking up a maelstrom of innuendos and insinuations, both in his resignation letter and his long, self-defensive, bitter blockbuster of a letter to employees leaving no doubt in anyone's mind about the founders having been thorns in his flesh.


Sikka has blamed their 'unrelenting, baseless/malicious, and increasingly personal attacks' for his decision to quit.

The Infosys board has been quick to back him up with a vitriolic broadside directed at Narayana Murthy himself.

'Murthy's continuous assault, including his latest letter, is the primary reason for the resignation of Sikka despite strong board support,' the board said in its statement, adding: 'Murthy's letter contains factual inaccuracies, already disproved rumours, and statements extracted out of context from his conversations with board members.'

Not only Narayana Murthy, but his admirers all over the world, will have every reason to be 'extremely anguished by the tone and tenor of the statement', hauling over the coals a role model for corporate chieftains in simplicity, austerity, philanthropy and uprightness, and a living legend in his own right who raised the company to the high stature it enjoys today.

The meanness of the statement apart, it nowhere answers the most fundamental and damaging aspects of the deteriorating work culture among top executives of the company to which Murthy had been repeatedly drawing attention.

The most objectionable among them was the quantum of the compensation packages of top executives of the company which were not only unconscionable in themselves but astronomical in India's setting.

For instance, the chief executive was granted a steep rise from Rs 6 crore (Rs 60 million) to more than Rs 65 crore (Rs 650 million) per year.

Similarly, the chief operating officer got a breathtaking bonanza of Rs 12 crore (Rs 120 million) as against the Rs 4 crore (Rs 40 million) he was getting previously.

This can only be termed obscene in the context of a measly 6 to 8 per cent increase for the rest of the employees and the fact that the salary for entry level software engineers had not been raised in the IT industry in India for the past seven years despite a 60 per cent rise in consumer price level during the same period.

Murthy was entirely right in demanding that top leaders of Indian companies must show 'self-restraint in... compensation and perquisites' and that the Infosys board should have set and followed standards of fairness by its actions.

He touched the chord of millions of Indians by his call, on a larger plane, to usher in an era of 'compassionate capitalism and make it acceptable to a majority of Indians who are poor'.

Murthy's close associates from the founding days, notably T V Mohandas Pai and V Balakrishnan, the former chief financial officer, were even more trenchant.

Pai was emphatic that 'unless people at the bottom (software engineers) get good, regular hikes, paying people at the top for doing nothing... for long period of time is totally wrong... We should have Indian norm for compensation. We can't follow American norm. We (Infosys) are not an American company.'

Balakrishnan said a pay hike for a top executive was 'terrible for any leadership' when subordinates were being asked to 'sacrifice' on wages.

He demanded reconstitution of the Infosys board since the quality of governance and value system that Infosys was known for were 'being decimated under the current leadership'.

This issue is at the heart of good corporate governance, but the Infosys board's statement simply turns a blind eye to it in its anxiety to traduce Murthy.

It has shown the same contemptuous disregard for public opinion by taking a self-exculpatory stand on the unsavoury allegations of violations of norms of prudence, propriety and probity pertaining to the $200 million acquisition of the Israeli firm Panaya by Infosys.

The board has claimed that the report of the law firm Gibson, Dunn & Crutcher, which it had appointed to go into the complaints concerning the deal, contained no adverse findings, but has refused to make the report public.

It has not also explained why executives involved in the acquisition, particularly Ritika Suri -- a former colleague of Vishal Sikka when he was the chief technology officer at Germany's SAP and a member of the team that clinched the deal -- quit Infosys soon after the global law firm submitted its report.

Suri, incidentally had been brought in by Sikka as head of corporate development and ventures after he became the chief executive.

Murthy, while questioning the abnormal pay rise for Sikka as well as the rationale for the large severance packages offered to two former employees, had wondered whether 'the company is using such payments as hush money to hide something.'

The board is also silent on the recommendations, if any, received from law firms and corporate governance experts claimed to have been appointed by it to hold consultations with the founders and other key stakeholders.

Thus, the present board must bear the entire responsibility for the dreadful mess in which Infosys finds itself today. It has been a classic case of fouling up one's own nest.

If at all I can fault Narayana Murthy, it is on the count of his taking the matter to the public domain without making it clear whether he had tried his best, with all the enormous prestige he commands, to sort out the issues troubling him by quiet and discreet discussions with the board.

After all, the founders togethers have a stake of roughly 13 per cent in the company, and they could have all together pulled their weight from behind the scenes to steer the company in the right and proper direction.

The investing public and indeed, all those for whom Infosys had so far been a source of inspiration as a symbol of all that is best in the corporate world, would be interested in knowing whether Murthy and his co-founders made the necessary efforts and were forced to come into the open because of their failure to make the board see reason.

The course personality clashes have taken in the cases of both the Tatas and Infosys, deemed to be exemplars of discernment, rectitude and excellence has set a bad example which the country could have well done without.

B S Raghavan, a retired member of the Indian Administrative Service, was the commerce and industry secretary of West Bengal, chief secretary of Tripura, chief executive of four major public sector enterprises, and adviser to the Indian subsidiary of a well-known German industrial firm.
He was also the chairman of three UN Committees, involved in negotiations in the United Nations Conference on Trade and Development, UNCTAD.

IMAGE: Vishal Sikka, left and, Infosys' co-founder N R Narayana Murthy.

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