Infosys board vs Narayana Murthy: Is the fight really over?

Key stakeholders, including Infosys founder Narayana Murthy, CEO Vishal Sikka and chairman R. Seshasayee claim a truce but analysts say the message is not clear


Infosys chairman R. Seshasayee (left) and CEO Vishal Sikka in Mumbai on Monday. The Infosys founders, led by Narayana Murthy, had complained of corporate governance issues at the firm. Photo: Abhijit Bhatlekar/Mint
Infosys chairman R. Seshasayee (left) and CEO Vishal Sikka in Mumbai on Monday. The Infosys founders, led by Narayana Murthy, had complained of corporate governance issues at the firm. Photo: Abhijit Bhatlekar/Mint

Bengaluru: Conciliatory remarks by N.R. Narayana Murthy, flattering ones about Murthy and Infosys Ltd by Vishal Sikka, and reassurances by the always-proper R. Seshasayee that everyone was on the same side seemed to suggest on Monday that India’s second largest software services firm had put the tussle between founders, board and management behind it. But is it really over?

Sikka, the first professional CEO of the company founded by Murthy and six others in 1981, and Seshasayee, a well-regarded professional manager and current chairman of the company, insisted in an interview that it was.

Infosys chairman: No negotiations, but founder inputs will be considered

“I cannot assure you anything, but me and Mr Murthy have spoken, and I hope something like this doesn’t happen again,” said Seshasayee.

On Monday, for perhaps the first time in several days, Murthy aired no fresh grievances, called Seshasayee a man of “highest integrity”, and indicated that he had pretty much said what he wanted to and was confident the company would address the issues.

The same morning, while addressing analysts at an investor conference organized by Kotak Securities, Sikka said his relationship with the founders “is wonderful”. He added that “it is a real privilege” to be Infosys’ leader.

Later that evening, at a press conference, Seshasayee and Sikka said Infosys’ board continues to “address issues all stakeholders, including ones that the founders have”. Seshasayee clarified later at the interview that these issues would be addressed by the board “within the overall framework of the fiduciary responsibility it has to all shareholders.”

Infosys row: The developments so far

He added that there is no “negotiated compromise formula” and that the board would treat the promoters just as it does “any other shareholders”. He said he has been entrusted with a job to do by the company and had no intention of leaving unless he is asked to.

“Here we have some stakeholders, founders and others along with them, who have nothing other than the best interest of the organisation on their mind and obviously, there will be a lot of passion,” Seshasayee said.

That isn’t the clear message analysts were expecting to hear, although it may be all they get. “I believe both parties (founders and the board) have realized that there has to be some compromise, meaning some demands of the founders met, and at the same time letting the current board and management run it the way they want,” said a Mumbai-based analyst at a foreign brokerage after the press conference. “But the most surprising thing is that looking at the commentary from the press conference, we do not know if that compromise has been reached.” The analyst requested anonymity.

Why Vishal Sikka and Narayana Murthy need corporate governance lessons

Murthy’s main issues with the board were over the severance pay to former chief financial officer Rajiv Bansal (that was subsequently stopped, last year itself, after Murthy expressed his displeasure) and the increase in CEO Sikka’s salary by 55% to $11 million a year. On Monday, Seshasayee said the first issue had taught the board to remove subjectivity about severance pay and insert it in employment contracts. He also defended Sikka’s pay and said it was approved by the board and shareholders.

Murthy’s comments in recent days have caused a stir, with many experts and analysts drawing parallels with recent events in the Tata group, where Cyrus Mistry was fired as chairman of holding company Tata Sons Ltd on 24 October last year and evicted from the board on 6 February.

But after Monday’s developments (but ahead of the evening press conference), R.K. Gupta, managing director at Taurus Asset Management, said that this issue was “probably not going to precipitate into something like” the Tatas’ fight with Mistry.

Infosys shares rose 1.6% to Rs983.50 at the close of trading on the BSE on a day the benchmark Sensex edged up 0.06% to 28,351.62 points.

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