Struggling Infosys hands back control to Narayana Murthy

Struggling IT major Infosys on Saturday recalled its founder N R Narayana Murthy and returned control of the company that has disappointed investors with poor earnings in the last nine quarters and losing ground to smaller rivals.

Murthy, who had shed executive role seven years ago and finally retired as head of Infosys in August 2011, has been appointed Executive Chairman, replacing K V Kamath during whose tenure the company shares slumped 15 per cent.

The current executive co-chairman S Gopalakrishnan will be re-designated executive vice-chairman while S D Shibulal, who was one of the seven engineers to launch the company in 1981 by pooling together $250, will continue as Chief Executive Officer (CEO).

Billionaire Murthy accepted a five-year term, over which period he will earn a salary of one-rupee per year and will have his son, Rohan, as his executive assistant.

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Describing his return as "very unusual", Murthy, who will turn 67 in August, said the company was facing challenging times and his job would be to add value to Shibulal's job with ideas.

"The board has taken this step keeping in mind the challenges that the technology industry and the company faces," Kamath said acknowledging calls from shareholders to strengthen executive leadership of the company.

Under Murthy's 19-year tenure as CEO until 2002, Infosys became the first Indian company to list on Nasdaq and grew to become an over Rs 40,000 crore ($7.3 billion) enterprise.

He is returning at a time when Infosys has performed below market expectations and has struggled to retain clients in North America and Europe. The firm has over past two years losts its IT bellwether status to Tata Consultancy Services,the country's largest software services exporter.

In FY13, revenues lagged its own forecast and projected lower growth in earnings than industry during the current year.  

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Murthy, the poster boy of Indian IT success, said his son Rohan will not have any leadership role and he was there only to him more "effective".

"Standing here today is very unusual to me. When I walked out of Infosys on August 20, 2011, I did not in my wildest dreams imagined that I will be back here in my executive capacity," he told a hurriedly called press conference.

For Murthy's re-entry into India's second largest software services firm, the Board raised the retirement age of executive chairman from 60 years to 75 years, effective today.

"When Chairman Kamath requested me, I was in a dilemma. I had to think very carefully. Then I realised that I was fortunate enough to add value in whatever way I could to previous CEOs too."

And after discussions with my family, I decided that as long as I have an opportunity to add value to Shibulal in any manner that is most enjoyable to me in the company of those that I enjoy I said I would have no objection," he said.

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Murthy defended Shibulal saying he had "distinguished himself as a very fine leader" and corporate history bears witness that impact of tough and timely decisions taken by CEOs have come much later.

"First of all let me remind you, it is 11 years since I gave up my CEO position we had.... when Kris Gopalakrishan left his position the company grew at 25 per in dollar terms much above the industry average. So it is not fair to sayfounder CEOs have not performed well," he said.

He said he would "add value" to Shibulal's role and that the company should focus on large application development, maintenance and independent validation services. 

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Kamath, who from today took up the position of Lead Independent Director, said, "the Board has taken this step keeping in mind the challenges that the technology industry and the company faces and in the interest of all stakeholders, particularly shareholders large and small, who have asked for strengthening of the executive leadership during this challenging time.

"Murthy said: "This calling was sudden, unexpected, and most unusual. But, then, Infosys is my middle child. Therefore, I have put aside my plans-in-progress and accepted this responsibility."