Infosys needs to be PROTECTED from NR Narayana Murthy? Why alarm bells are ringing

Experts say new corporate governance rules are required as the face-off between the founders and the board is affecting the interests of all stakeholders.

IT major Infosys needs to draft new norms of corporate governance to prevent interference from the founder group in future, given the standoff between the board and promoters, according to industry experts. Shriram Subramanian, MD, InGovern, a proxy advisory firm, told FE that the company will have to introduce a new governance structure. “How can things move forward if you have somebody doing the back seat driving,” he remarked. Currently, the face-off between the founders and the board is affecting the interests of all stakeholders — employees, clients and investors. This can be resolved only if new norms are brought in place to prevent further interference from the founders, Subramanian said. Vishal Sikka has stepped down as CEO, stating that he had enough of the constant assault on him. Founder NR Narayana Murthy, through a series of letters, had expressed his view that the corporate governance standards in the company had fallen, though he never criticised Sikka’s performance.

HfS, a technology research firm in its note titled, ‘Infosys gives up its American dream’ said, “The crucial question though is whether the group of founders will continue to interfere in public or whether they finally take a back seat and demonstrate confidence in any incoming CEO and his executive team. If the latter is not being addressed, any new king will wear very old clothes.” Infosys has already stated that it would scout for a new CEO and the process is likely to end March 2018, with Pravin Rao currently holding the interim position. In the current environment, the probability of the IT major bringing back another outsider like Sikka for the top role remains very doubtful. ICICI Securities in its note following the abrupt exit of Sikka had said barring Infosys, none of its other peers had its fortunes linked to just one person.

“Tata Consultancy Services (TCS), Wipro and HCL Tech (HCL) have seen their CEOs change over the past two years with the transitions being seamless, having limited impact on employee morale and customer perception,” it said. Sikka’s exit has also brought to halt many of the new initiatives which were ushered by him like design thinking, zero distance, renew and new strategy. HfS said, “Vishal Sikka’s resignation grinds to a halt this public transition from the founders’ generation to becoming a ‘normal’ corporate company.” Brand Infosys has taken a huge beating, said InGovern’s Subramanian. “An early resolution to this crisis is important. Laying down those new norms of governence is crucial.”

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First published on: 23-08-2017 at 06:38 IST