What has been rumoured till now has come to pass – cofounder Nandan Nilekani has been named as the non-executive, non-independent Chairman of Infosys board, according to a Reuters report. This is expected to put an end to an acrimonious dispute between its board and founders and shore up the plunging shares. Among the many duties that he will have is achieving a series of goals including hiring a new CEO. In his first reaction, Nandan Nilekani said that he is happy to return. Ahead of appointment of Nilekani, Infosys Chairman R Seshasayee, co-chair Ravi Venkatesan, recently-resigned CEO Sikka plus two other board members resigned. Infosys has accepted their resignations. Nandan Nilekani has taken over in his new position with immediate effect. Jeffrey S Lehman has resigned as Director at Infosys too. UB Pravin Rao will continue as interim CEO and MD at Infosys. Nilekani will consider broad-based shareholder consultation. The official statement released by Infosys said, “(The) Board of Directors has unanimously approved the appointment of Mr Nandan Nilekani as the Non Executive Chairman of the Board, effective immediately.” Apart from the cofounders themselves, a number of institutional investors in Infosys were asking Nilekani be appointed. Nilekani was first appointed CEO in 2002 and he stayed in that position till 2007.
Nilesh Shah at Kotak MF has reacted to this latest change at Infosys by saying, “Confident that Nandan Nilekani will be able to win confidence of promoters, investors.” In his reaction, former Sebi chief M Damodaran said, “Nandan Nilekani has been brought back as he has broad-based acceptance of stakeholders.” They were speaking to ET Now.
This appointment comes in the wake of the feud that went on between chairman emeritus NR Narayana Murthy and the board that was chaired by R Seshasayee and co-chaired by Ravi Venkatesan and which finally led to then CEO and MD Vishal Sikka quitting. He quit after making some explosive revelations and saying saying the assault on him by Murthy was distracting and disruptive. In fact, he actually said ‘continuous assault’.
Notably, Nilekani had resigned from his post in Infosys in 2009 and joined former PM Manmohan SIngh led UPA government. He was appointed chairman of the UIDAI and became the architect of the Aadhaar.
Three points of contention at Infosys:
1. Compensation of Sikka and other top executives
2. $200 million spent on buying of Israeli company Panaya
3. A generous severance package that Infosys when a former finance chief quit.
Here is the statement from Infosys:
Bangalore – August 24, 2017: [NSE, BSE, NYSE: INFY]: Infosys (NYSE: INFY), a global leader in consulting, technology, outsourcing and next-generation services, today announced that its Board of Directors has unanimously approved the appointment of Mr. Nandan Nilekani as the Non Executive Chairman of the Board, effective immediately. Mr. Nilekani is an iconic leader, a successful entrepreneur and investor, and someone who has played a pivotal role in India’s transition to a digital economy. Among his many achievements, Mr Nilekani led the implementation of one of the world’s biggest technology initiatives, India’s Aadhaar program, which has now enrolled over a billion Indians and which is transforming the lives of ordinary Indians every day. He is also one of the co-founders of Infosys and served as its CEO from 2002 to 2007.
In welcoming Mr. Nilekani, the outgoing Chairman Mr. R. Seshasayee, who stepped down from the Board today, stated, “Nandan is the ideal leader for Infosys at this stage in the Company’s development. His appointment will allow Infosys to focus on the strategic changes it needs to make in order to capitalize on the attractive opportunities in the years ahead. Under Nandan, Infosys will build a cohesive management team that will no doubt take the Company to a leadership position in the industry. I believe these changes will infuse further confidence to the stakeholders in executing the transition plan and in reinforcing the strategy for the future. I am confident our employees and customers will join me in welcoming Nandan to the Company.”
Also stepping down from the Board, effective immediately, are Dr. Vishal Sikka, Prof. Jeffrey Lehman and Prof. John Etchemendy, each of whom welcomed the appointment of the new Chairman. Dr. Sikka said, “Last week I said that my remaining on the Infosys Board was to primarily enable a smooth transition. In Nandan, we have found an ideal leader to manage this transition. “I welcome Nandan’s appointment as Chairman to help guide Infosys to new frontiers of success and wish him, Pravin and all Infoscions the very best in the times ahead.”
Prof. Lehman, who was scheduled to retire from the Board in April 2018, stated, “With Vishal’s departure, Infosys is entering into a stage in which the time demands on independent directors will be compounded even further. In light of the other demands on my time, I think it best if I accelerate my departure from the Board by a few months to allow a new independent director to start in this important role.”
Prof. Etchemendy stated, “It has been a great honor and pleasure to serve the shareholders of Infosys for the past three years, and to have a front row seat during the transformative strategies that Vishal Sikka brought as the CEO. With Vishal’s departure, the board and his successor will embark on a new phase in Infosys’ future, and I think that giving up my board seat to a new independent director is the right decision.”
Upon the appointment of Mr. Nilekani as Chairman, Mr. Ravi Venkatesan stepped down from his role as Co-Chairman. Mr. Venkatesan will continue on the Board.
The Board had, on August 18, 2017, appointed Dr. Sikka as the Executive Vice Chairman (EVC) to facilitate a smooth transition. This transition has been expedited with the appointment of Mr. Nilekani. Given that the EVC employment agreement with Dr. Sikka had not yet been executed, the Board, prior to the induction of Mr. Nilekani, decided that the Company will complete all resignation formalities as per Dr. Sikka’s employment contract as MD and CEO as executed on April 1, 2016 and approved by the shareholders. Accordingly Dr. Sikka will receive 90 days’ base pay in lieu of notice of US$ 246,575, a variable pay of US$ 205,572 and company-paid COBRA (employee benefits) for 90 days. All equity awards outstanding as on separation date to the extent such awards are unvested will terminate on the date of separation. All equity awards that vested during his employment with the Company will remain as vested as per the terms of the equity plan and award agreement A separation agreement reflecting this and other terms such as a mutual release and non-disparagement obligation has been approved by the Board.
Mr. Venkatesan, took this opportunity to thank Mr. Seshasayee, and stated, “It is a great privilege to have worked with a person of such stature and dignity as Sesh. It has been an honour for the entire Board to be captained by him. His strength of character and his unwavering commitment to the Company is deeply admired by all members who have served alongside him on this Board.”
He further stated “Jeff and John have been invaluable colleagues on the Board, providing guidance and ensuring continuity through the significant changes Infosys has seen during this period. I also thank Vishal for all his contributions including his commitment to facilitate a smooth transition.”
Mr. Nilekani added, “I am happy to return to Infosys, now in the role of non-executive chairman, and look forward to working with my colleagues on the Board and in executive management on the business opportunities we see before us and delivering benefits to our clients, shareholders, employees and communities. I thank Vishal for his service as the CEO of Infosys over the last 3 years and wish him well in his future endeavors.”
Mr. Nilekani also stated that the Board will actively consider a broad based shareholder consultation process as a critical part of its overall engagement initiatives with all the stakeholders of the Company that are being taken up on a priority basis.
Mr. U. B. Pravin Rao who will continue as Interim CEO and MD and, also was pleased to welcome Mr. Nilekani to Infosys. The Infosys Board will continue with its earlier stated plan to identify a permanent CEO and MD.
The Company will organize two investor calls of an hour each to discuss the announcements.
The first investor call will take place at 10.00 am IST on August 25, 2017 (12.30 am EST; 12.30 pm Singapore/HK time; 5.30 am London time). The second investor call will take place at 6.00 pm IST on August 25, 2017 (8.30 am EST; 8.30 pm Singapore/HK time; 1.30 pm London time). The dial-in numbers for the calls will be put up on the Company’s investor website. A Press conference will take place at 4.00 PM IST on August 25, 2017.