Bengaluru: Infosys Ltd may not be making the kind of news it did in January and February when matters soured between the founder-promoters, led by N.R. Narayana Murthy and the company’s board (led by R. Seshasayee) and management led by Vishal Sikka, but things are far from normal at the company, executives say.
Indeed, one of them called it a Mexican stand-off, referring to a popular trope in Hollywood films where everyone has a gun, sometimes more than one, pointed at somebody else.
Matters seemed to have cooled with the appointment of law firm Cyril Amarchand Mangaldas to serve as a bridge between the founder-promoters and the board and the more recent appointment of Ravi Venkatesan, a well-regarded executive who was already an independent director on the board, as co-chairman. Infosys, while presenting its results on 13 April, said Sikka’s salary totaled $6.8 million in the year ended 31 March, lower than the agreed upon $11 million. The chief executive’s high salary, cleared by the board, was one of the issues that irked the founders.
There were other such issues as well that Murthy aired earlier this year, even suggesting that Seshasayee step down.
But Sikka and Murthy have not met or spoken for close to five months, said three people familiar with the developments at Bengaluru’s most-watched company. Murthy has also not spoken with non-executive chairman Seshasayee since the two met in Mysuru on 12 February, the three added. All three did not want to be identified.
“Communication (between Murthy and Sikka) has completely broken down,” said one of the three people, an executive close to Sikka, adding that the two last met in December. “(Sikka has) become an inadvertent casualty in this fight (which is basically between Seshasayee and Murthy). He (Sikka) wants to sit and resolve all issues (with Murthy) but because of some people (close to Murthy), a constructive discussion cannot take place.”
The person declined to name these people.
Murthy did not respond to an email sent to him in mid-April seeking comment. Seshasayee did not respond to emails and text messages. An Infosys spokesperson said the company would not respond to speculation.
Cyril Shroff, head of Cyril Amarchand Mangaldas, wrote to the founder-promoters last month asking for feedback on the current composition of the board. Infosys hired the law firm in February to evaluate inputs the company receives from promoters and other external stakeholders and make recommendations to the board. It isn’t known if the founders replied to Shroff’s email.
Shroff did not respond to an email.
Since Murthy and other founders are no longer on the board, both Seshasayee and Sikka don’t have any reason to meet them. Only five of the seven original founders, including Murthy, are categorized as promoters, and together own 12.75%.
“I would say it is time the board and the management start to ignore what Murthy has to say and continue with the business,” said Shriram Subramanian, founder and managing director of proxy firm InGovern Research.
Still, some say breaking all communication with the founders is not that simple.
“There should be a working relationship between a large shareholder, who is the also founder of the company, and CEO and the board,” said the second of the three people, who works with Infosys.
The issue is distracting management, the first executive said, adding that Sikka cancelled a meeting with a client in April for an internal meeting on “how the company should respond to issues raised in the media (by the founder-promoters)”.
Sikka himself termed the controversy a “distraction” and cited it as one of the reasons behind Infosys’s poor March-quarter performance.
Sikka and Murthy have in the past spoken on subjects beyond Infosys, Murthy said in January. “Vishal is a rare technocrat with whom I can discuss topics as diverse as quantum mechanics and B-star trees,” Murthy wrote in an email on 23 January.
The disagreements between the founders and the board started in February last year when the board decided to give Sikka a 55% pay hike to $11 million. Only 23.57% of promoter votes were cast in favour of a resolution reappointing Sikka as the managing director and CEO in April.
Some of the founders were further peeved at the Infosys board’s decision to approve a Rs17.38 crore severance payment to its former chief financial officer, Rajiv Bansal. Although Infosys stopped the payments later, Murthy in June suggested that the board induct former Infosys employee D.N. Prahlad (also a relative of Murthy) on the board. The board finally inducted Prahlad as an independent director in October.