At Infosys, there are no twin power centres: R. Seshasayee
Infosys non-executive chairman R. Seshasayee on relationship with company founders, CEO Vishal Sikka’s compensation and the role of the board
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Bengaluru: It has been a little over 15 months since R. Seshasayee became the non-executive chairman of Infosys Ltd. His term coincides with a very interesting time for the company, which is trying to regain its tag as the bellwether of the Indian IT industry under its first non-founder chief executive, Vishal Sikka.
In an interview, Seshasayee explained his equation with Sikka, the changing role of the board, the challenges it faces, its relationship with the company founders, what he likes about Sikka’s leadership style and why it is wrong to say that Infosys has twin power structures. Edited excerpts:
Is Infosys in a better shape now than when you started in this role?
Firstly, the change at the leadership level, to have someone like Vishal (Sikka) come (in), has (given) a very clear strategic direction to the company, given the changing landscape in the industry. That is a very big step forward.
From the board’s perspective, it is very important to have the right leader, and I believe we have the right leader. From the board’s perspective, it is important that the leader articulates the strategy (and) the board is aligned to this strategy. I can categorically say that the board is fully aligned to this strategy Vishal has sketched.
I and the board feel extremely good that this strategic change in direction to meet the new demands in the business landscape has gone down very well. To communicate this kind of a change in an organization that is as large as Infosys is not easy.
Now, of course we have the execution challenges. And those are things which we will learn as we go along. We have had a few bumps. We have had some quick learning. I think, by and large, the strategy is getting executed with the right speed and in the right direction.
What is the board’s role in designing this strategy?
Ideally, the board should pick the right leader for the company and the leader should articulate the strategy. The board has an active role to play for sure in understanding the strategic proposal, challenging that, and getting an alignment between the management and the board.
The board cannot stand aside and say that all this is strategic direction and not our problem. The board has to be fully engaged in (the) formulation of strategy.
We have had in the last couple of years a pretty deep level of engagement. The board does not meet only for board meetings for approving what is put on the table. So the engagement has been continuous. It has not been even that it takes place (just) once a quarter.
The second is that I also think that it is important to think for the board to be learning. Learning is an important DNA of Infosys. Learning does not just apply to executives, the rank and file of management. It equally applies to members of the board. We have had systematic immersion sessions. And our intent is to intensify these sessions. Intent is to make sure that we are not merely sitting and listening in these sessions.
This is a journey. It is never-ending. But I do think both these continuous engagement and continuous learning are making it possible to have a very constructive dialogue with the leadership.
What are the big challenges faced by the board?
I cannot think of a company of this size which has gone through transformation simultaneously on three fronts.
The first is the business transformation. All IT firms are going through this, simply because (their) clients are going through this transformation. That is one massive transformation. That is pervasive and happening all across.
The second is the move from (being) an iconic promoter-led organization to an organization that is professionally managed at the management and board level. I was actually looking at how many top 100 companies in India have entirely professional board and professional management. If you leave aside the banks and the public sector undertakings, perhaps Infosys is the only company.
From a governance construct, this is a very unique and desirable construct, one which would be the ideal construct. But this transformation from a promoter-managed organization to a professional-managed organization both happening at the same time, is a huge transformation.
Actually the average tenure of the board, if I leave aside Jeff (Professor Jeffrey Lehman), is two-and-a-half years. So you have a completely new set of people.
And so, to be able to navigate this huge company in the right direction, from the point of view of both strategic (issues) and governance, that requires a great deal of work, and a great deal of rescripting of the playbook.
We have had challenges in the first quarter. We have had some challenges (with) a couple of good leaders, whom we would have liked to retain, not being there. We have had some challenges regarding the perception issue into governance. I don’t think these are real issues but perception issues. But we have very quickly learnt and we are putting in very quickly in place the right kind of solutions. That is the second kind of transformation which we are scripting very well.
And then there is the third kind of transformation which is the cultural transformation. From a company that had been pretty much India-centric, we are truly now global-minded. This is a cultural shift.
So, in some sense, we need to reset the needle.
Each of these transformations is itself a challenge. It may not be apparent to someone on the outside.
There is some criticism that Infosys’s board does not have enough people with a technology background.
I’m hearing this for the first time that we do not have enough people from tech background on the board. We have Vishal and (chief operating officer) Pravin (Rao).
Beyond Vishal and Pravin?
Let me explain the diversity we have on the board. We have Ravi (Venkatesan), who has spent years in technology at Microsoft. Of course, we have Roopa (Kudva) and Punita (Kumar-Sinha). Look at their background. They have not been only in one industry. Roopa has spent a lifetime at a variety of industries, evaluating, assessing, rating a variety of industries. And so has Punita. We have people dealing with different firms, including technology firms. Then we have people like Jeff and John (Etchemendy) who bring the academic discipline to it. Kiran (Mazumdar-Shaw) is a very entrepreneurial person. We have a very good diverse group of people. Having said that, we are constantly on the lookout for the right kind of talent. We are pretty much looking at every possible skill where we think we have a gap and which we think we need to bring in. So we are looking at people. So that is a continuous process. We have people on the board who can read the future, have good understanding of technology trends, are able to challenge the strategic direction. We do take external inputs where we need. So those people don’t have to be on the board.
So could you perhaps expand the board?
We are on the lookout, and we have some candidates in mind and we will do it at the right time.
Help us understand the board’s relationship with the company founders.
So this iconic institution has been created by an iconic leader (N.R. Narayana) Murthy and his wonderful team. This is an outstanding or exceptional kind of history where Murthy and team decided to step down or step away.
I must tell you categorically that while I have personally a lot of communication happening with Murthy, not once even by accident have the promoters asked for information which is not available to the public.
That must be said to the credit of the promoters that they have not sought any information which would give them any preferential access to any information.
We talk about many things. We talk about perceptions that you might have from what is available in the public domain, about the kind of strategic direction. And I take his advice very seriously.
But that said, the board has the responsibility to do what is right for the institution. The board is closest to the facts and the situation on the ground.
And therefore, information and facts, which are available to the board must drive the board in the right direction, and that decision will be of the board only.
Do you think the founders could have expressed their unhappiness with certain board decisions such as Sikka’s compensation or Kumar-Sinha’s appointment differently?
This is a question that should not be asked to me, since this is what the promoters chose to do; so it will not be fair for me to respond. From the board’s perspective, we have advice coming from many other investors and not just the promoters. If you believe we do not have discussions with any other investors, you are wrong. The conversations we have with the promoters are no different than those we have with other investors. So it is not right for me to be second-guessing on what they should do.
Were you a little saddened by the way they expressed their displeasure?
This is a free world and everybody has their own viewpoint. So, do I get saddened by the percentage of negative votes on anything? No. I have a job to do, and we have some 99 percentage in favour and that is a resounding endorsement of the board’s recommendation. We should just move on.
What issues do you seek their advice on?
There are many issues on which I seek advice from many people. So why would you want to only look at what I’m seeking from Mr Murthy. Murthy has been a friend for 30 years. We have worked together on boards. We were together on the board of ICICI, we have worked together on many other forums. So he is one person I respect, like other people. So I don’t see anything unusual in that.
There is this perception that there are twin power centres at Infosys: Murthy and Sikka.
First, there is no such twin power centres. That is completely wrong, and that will be very unfair to the promoters. Because, like I mentioned, Murthy has been an exceptional leader who has chosen to stay away and only give advice when sought from. So it will be utterly wrong. Now, the second thing is that when you say there is this perception. Now I don’t want to deal with perceptions. We must deal with reality. I’m dealing with reality. The reality is that what I have clearly said.
What are the issues on which Sikka seeks your advice?
Because of the fact that we have a very unique construct, the engagement of the board (with Sikka) has been continuous. My engagement with Vishal has been more intense than the rest of the board. I think we speak almost every week, sometimes multiple times a week. We discuss different issues, say related to people, organization, performance, relating to issues on strategy, customers. We discuss also spirituality and philosophy on weekends. We have an excellent rapport and relationship. We have a lot of common interests. Last night, we were talking on pure sciences. So, the foundation of the relationship is one of complete mutual trust, and complete transparent sharing of information and views. So there are many things that we do.
How is the board helping Sikka in this transformation?
It’s a two-way constructive process. It’s not on the basis of a paper that is put on the table. The way it is being done is through continuous, comprehensive and concerted engagement.
What is the toughest issue you have advised him on so far?
The toughest discussions we have had are on philosophy.
Is Vishal’s compensation of $11 million a year linked to Infosys clocking $20 billion by March 2021?
The compensation is linked to targets which are publically given. There is a trajectory for this. The compensation is linked to that trajectory. This is something which the board and Vishal have discussed and agreed.
Can you help us understand the weightage of the three specific targets (total revenue, revenue per employee, operating margin) on Sikka’s variable pay?
There is probably no other Indian company which has so clearly linked pay to targets which have been made public. To my mind, this is the most transparent way of getting shareholders’ approval. In the trajectory, we have to take into account many things. We need to take into account the industry dynamics, the company dynamics, the people dynamics, all of that. That’s something which the board is charged with the responsibility to do and we will do so.
Can you give us some details about the trajectory itself?
Can you tell me another company that has been giving the targets for the compensation of the chief executive? There is good reason why no other company does this. It is not because this is inconvenient or anything. It is because, as I said, it’s a very dynamic situation. Every month, we see changes in the landscape. Every month, we see new challenges. The board is a delegated authority of the shareholders to run this company. It is therefore in the fitness of things that the board does the job that has been entrusted by the shareholders. It doesn’t kick back to the shareholders the job that has been entrusted. We have gone one step further to say, yes this long-term goal is what we believe must be the reference point for the compensation.
So is it more aspirational in nature?
No, I have said that there is nothing aspirational in this. This is a target which the company is looking at, is pursuing. Now nothing is cast in stone. But this is, at the moment, the target that we have.
Are you saying that the growth of the industry will also be taken into account?
The growth of the industry is pretty much the playfield, right? So we have got to look at the growth of the industry in the context of assessment.
(For any company,) the target is fixed for the annual budget in the context of what you see is the market situation. Technology changes, all of it are taken into account. A five-year goal is fixed on what you believe is the kind of the trajectory in this. We have to keep constantly calibrating both the environment and the industry. As of now, we are not changing those targets (for Infosys).
Can they be changed?
That’s a speculative question.
Why did the board change its original plan on the promised payment to former chief financial officer Rajiv Bansal?
All I can say is I have already made the statement suo motu in the AGM (annual general meeting). You wrote this article (referring to Mint’s story in May on Bansal’s unusually high severance pay).
Because you wrote this article, I thought it is important and it is our responsibility to make sure that we address this issue. So the issue was not raised in the AGM, but I made a suo motu statement saying that we believe that there is no impropriety.
There is a severance agreement. There are rights of the parties in the contract. And the contract will be administrated in line with the rights of the parties. Period. That is all.
So has there been any change in the agreement?
That is not something you need to be looking at all. I am only saying there is a contract, (there are) the rights of the parties in the contract and the contract will be administered in line with the contractual rights of the parties. Period.
So is it fair to assume that you could rework it if one of the parties did not abide by its terms?
This is an entirely legal issue. All I need to say is that there are no other extraneous considerations for this, for the administration of this. It will be driven by the contractual rights.
Has anything happened within the realms of that contract that could lead to a change in it?
No matter where you are coming from, the only two things which are relevant to the public and relevant to everybody else (are): Is this an issue where there is impropriety? I have said no, repeatedly no, and I stand by that.
Is this contract getting changed or cancelled for any other extraneous considerations? I am going a step further to say: The contract will be administered based on the rights of the parties in the contract. Period.
How do you like Sikka’s leadership style?
We have the right kind of leader in Vishal. His understanding of the changes, his insight into the changes is outstanding. Vishal’s articulation of a solution, even in the context of the auto industry for example or the banking industry, is absolutely on the dot. We have a very good leader who understands client requirements and his client connect is exceptional. His strategic direction is exceptional. He has been a phenomenal person to motivate a very, very large crowd. It’s not easy for a new person to step in and have this kind of influence. We certainly have an exceptional leader.
How has the board’s role at a company changed?
The role of a board has changed phenomenally, and for the good. It is no longer this friends’ club that you had in the past and people coming to have a cup of coffee and go back. This is the trusteeship concept. That is getting to be far better understood now by enlightened boards, and therefore, the responsibility that comes with that.
In the process, the engagement is getting to be much more. Increasingly, I find that the board meeting is just one punctuation mark in that engagement.
It also brings in the need for a greater amount of understanding of the business and the independence to challenge. The chaired board becomes a very informed coach for the team.