Narayana Murthy raises issues at Infosys again
Bengaluru: Infosys Ltd founder N.R. Narayana Murthy claimed in an email to some of his advisers that he had been told by at least three independent directors of the company that Vishal Sikka was more chief technology officer (CTO) material than chief executive officer (CEO) material.
Mint has seen a copy of the email dated 9 August and also independently ascertained its authenticity from a company executive, a board member and a third person, all of whom asked not to be named. Mint couldn’t independently confirm the claims made in the email.
“All that I hear from at least three independent directors, including Mr Ravi Venkatesan (co-chairman), are complaints about Dr Sikka. They have told me umpteen times that Dr Sikka is not a CEO material but CTO material. This is the view of at least three members of the board, and not my view since I have not seen him operate from the vantage point of an Infosys board member,” Murthy said in the email.
Murthy has publicly lambasted Infosys over the course of the past six-seven months for lapses in corporate governance (allegations the company has denied repeatedly). In the latest email, he went on to criticize the board for failing to uphold the company’s famed governance standards and not creating “checks and balances required in any well-run company”.
“I have nothing against Dr Vishal Sikka. I enjoy spending time with him. I have never commented about his strategy or its execution,” Murthy wrote in the email. “My problem is with governance at Infosys. I believe that the fault lies with the current board. If the board had not embraced inaction and had ensured proper governance then they could have created checks and balances required in any well-run company. That, alas, does not exist today.”
Murthy did not name the two other independent directors who do not have confidence in Sikka, who took over as CEO in August 2014.
Murthy did not respond to repeated requests for comment over email, phone calls and text messages.
Venkatesan declined to comment.
Infosys did not respond to specific questions related to Murthy’s claims but reiterated that there had been no wrongdoing.
Infosys’s board has Sikka and chief operating officer U.B. Pravin Rao as executive members and nine independent directors. Other than non-executive chairman R. Seshasayee and co-chairman Venkatesan, the other independent directors are D.N. Prahlad, Punita Kumar-Sinha, John Etchemendy, Jeffrey Lehman, Roopa Kudva, Kiran Mazumdar-Shaw and D. Sundaram.
The contents of the email from Murthy raise the spectre of deep divisions on the board of Infosys and, more worryingly, also raise questions about Sikka’s future at the company when he is already battling against time to orchestrate a turnaround amid several key top-level executive departures.
The board member who confirmed the contents of the email also confirmed a separate email written by Murthy on 8 July, highlighting several reasons why the board of Infosys should make reports of all investigations public. The board member declined to elaborate further, but shared Venkatesan’s reply to Murthy on 14 July.
On Thursday, Infosys said: “Each of the professional, exhaustive, expensive and time consuming investigations unequivocally found that the complaints were false and that there was no evidence whatsoever of wrongdoing. The Board has described the results of those investigations publicly, and most recently, on June 23, 2017 released publicly a report by Gibson Dunn, the investigating firm, that investigated the allegations (including alleged improprieties in the acquisition of Panaya) made by an anonymous complainant to SEBI in February 2017. The report was addressed to the Audit Committee and summarized their findings that there was no wrongdoing.” It said the investigations involved interviews with “dozens of people (including Mr N.R. Narayana Murthy)...”
It added in the emailed statement: “The Board welcomes feedback, input, and criticism regarding substantive matters, but it denounces the repeated and unfounded personal attacks on Dr Sikka and the members of the Board. The Board will continue to judge itself, management and the Company based on substantive performance as established by demonstrable evidence, and not on unsubstantiated complaints by anonymous persons or media reports of statements made by critics who promote or rely on incorrect information.”
On 8 July, Murthy emailed the board, explaining the rationale behind why he wanted Infosys to make public the reports of the three investigations (and an independent valuation of Panaya) undertaken since August 2015.
“What were the objections of the former CFO—Mr Rajiv Bansal regarding Panaya acquisition as evidenced by the three investigations, emails and transcripts of mobile conversations obtained from mobile carrier companies?” Murthy asked.
Murthy also asked the board if the company could categorically say that no employee or a relative of the employee benefited from Infosys’s decision to spend $200 million to buy Panaya in February 2015. He also asked why Infosys sacked former general counsel David Kennedy, and why the company handed out $868,250 in severance pay to him.
“Please publish the four reports in full; provide straight answers to these questions on the website of the company so that the shareholders who have paid for these legal investigations have full access to the output of these legal firms,” wrote Murthy.
In his 14 July response to Murthy, Venkatesan reiterated that the Panaya investigation had found no evidence of wrongdoing by the company. Mint has seen both these emails as well.
“I wish to assure you on behalf of the Board, that all of the questions raised by the idealist shareholders has been looked at carefully by the investigation and they found no evidence of wrongdoing by the company, or the directors and employees,” Venkatesan wrote.
“You are also aware that the repeated and prolonged investigations have taken a toll on morale and business focus, and it would be in the interest of all shareholders to move on. With this in context, the Board, having been satisfied about the soundness of the investigation has decided to treat this matter as closed,” he added.
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 reappointing Sikka as managing director and CEO in April last year.
Some of the founders were also peeved at the Infosys board’s decision to approve a Rs17.38 crore severance payment to former chief financial officer Rajiv Bansal. Although Infosys stopped part of the payment 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.
Since October 2015, Infosys has hired external law firms to undertake three investigations and also conducted an independent valuation of Panaya.
Law firms Cyril Amarchand Mangaldas and Latham and Watkins carried out two probes in October 2015 and August 2016 to investigate if there was any impropriety in the board’s decision to give Bansal the generous severance payment. A third probe by Gibson, Dunn & Crutcher investigated if any Infosys executive profited from Panaya acquisition. Infosys has repeatedly stated that none of the investigations have found any wrongdoing, although the company has not made any of the four reports public.