In letter, Infosys founders led by NR Narayana Murthy, raise governance concerns; Vishal Sikka performance not under scanner

By: | Published: February 9, 2017 6:21 AM

The missive from Infosys founders raising concerns on corporate governance in the company has posed more questions on the fiduciary standards of the board and not so much on the performance of CEO Vishal Sikka.

infosys narayana murthyThe founders of Infosys led by NR Narayana Murthy in a letter addressed to the board have also suggested that former board members like TV Mohandas Pai, V Balakrishnan and Marty Subramanian be brought back as directors, people familiar with the situation told FE. (Reuters)

The missive from Infosys founders raising concerns on corporate governance in the company has posed more questions on the fiduciary standards of the board and not so much on the performance of CEO Vishal Sikka. The founders of Infosys led by NR Narayana Murthy in a letter addressed to the board have also suggested that former board members like TV Mohandas Pai, V Balakrishnan and Marty Subramanian be brought back as directors, people familiar with the situation told FE.

The current board of Infosys is headed by chairman R Seshasayee and the letter from the founders has raised questions on certain decisions taken by the company in the last one year that they perceive as questionable.

These include the compensation paid to some of the top outgoing executives and the ambitious revenue goal set out by the company.

Sources told FE that founders of Infosys felt that the board should have been more proactive in questioning the decisions taken by the executive team of the company and some of them went against the ethos the IT major has stood for over the years. “Value based members” should be brought back into the board is what the founders seem to have indicated. An email query sent to Murthy remained unanswered at the time of going to print.

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It is also understood that the founders, who currently hold a 12.75% stake in the company, wanted the chairman of the board to uphold the corporate governance standards set by them. However, sources said that any likely decision regarding the composition of the board or the future plans of the company will be taken after informally sounding out key investors.

Infosys in a response to a query from FE said, “The Board receives suggestions and inputs from various stakeholders, including Promoters, which are evaluated with due importance. The Company will continue to be guided by the overall interests of all stakeholders. With regard to concerns on governance being discussed in the media, we would like to reiterate that all decisions have been made bona fide, in the overall interest of the Company, and that full disclosures have already been made thereon.”

Sources said the founders did not raise questions on Sikka’s performance, given the reality the entire IT industry has been witnessing slowing growth. However, they wanted the board to be circumspect on setting the ambitious goal of achieving $20 billion in revenues by 2020. Under the current circumstances, it looks like an ambitious target to achieve as it would mean doubling of revenues in the next three years.

The founders led by Murthy have had an uneasy relationship with the current board ever since the non-promoter CEO Sikka took over the company in August 2014. There were reports that the founders were divided in their votes on the issue of Sikka’s annual compensation increase from $7.08 million to $11 million. It is now understood that founders have come together in an ostensible move to safeguard the interests of the shareholders. The induction of DN Prahlad onto the board is also seen as a step in this direction.

The key issues raised by promoters include the severance package paid to the former chief financial officer (CFO) Rajiv Bansal, who resigned from the company in October 2015. Infosys in its annual filings revealed that it will be paying Rs 23 crore to him but later scaled it down to Rs 17.4 crore after several queries were raised. Similarly, the compensation of former chief compliance officer and general counsel David Kennedy, who resigned in January this year, stood at $868,250. This too had raised some concerns.

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