INFY CRISIS

Source: The Hitavada      Date: 20 Aug 2017 10:29:41

SINCE the day N Narayana Murthy, co-founder and ex-chairman of information technology giant Infosys, came out openly against its Chief Executive Officer (CEO) Vishal Sikka for the “deteriorating standard of corporate governance in the company” an upheavel in terms of the latter’s resignation was on cards. For experts, it did not come as a surprise but what left them wondering was why Sikka called it quits despite a strong backing from the board.

Sikka’s quitting was imminent the day Murthy made a direct attack on the CEO in an interview where he likened the former to a chief technology officer rather than a CEO. The bickering between Murthy and Sikka was brewing since the day the blue-chip enterprise decided to elevate Sikka. What followed in the last three years was a series of allegations, investigations and accusations over exorbitant severance pay package to the CFO, overseas acquisitions and confrontations over salary hike.

Sikka’s exit has once again opened the promoter vs outsider debate for the top job. Indian blue-chips are mostly run by promoter family members. The promoters and founders always look at their company as a baby, nurturing and tending to its needs with lots of emotions. The ‘outsiders’ in form of top-most executives and other high positions mostly toe the same line. Problems spring up when there is a difference in perceptions of the owner and the top officer. It’s a fight of looking at an enterprise as a pure commercial entity or as a family legacy.

Mostly, family-run companies groom their children as successors. Top firms like Hero Group, Bajaj and Mahindras have been practicising this successfully for generations. In major firms, the promoters and founders are on the same page, following a set culture to run the company. In the Infosys case, a fracas over governance spiralled into a major crisis due to differences over following a culture. Despite quitting active role in the company, Murthy wanted to see things pan out the way he set it up while Sikka was a “rockstar CEO” attempting a blend of the orthodox and modernity. The acquisition of Israeli cloud company Panaya was Sikka’s expansion effort.

The Panaya deal proved to be the flashpoint for the change game. Murthy had red-flagged the deal, raising questions over Sikka’s ability and execution of strategy. The lid finally blew off in a Friday Fury which saw Infosys losing investor wealth amounting to Rs 22,480 crore. The plunge was a natural reflex action on part of the markets. Infy has a strong board to overcome this wipe-out.

The Infosys crisis should serve as a reality check. Conflicts in such reputed companies can have a cascading effect on corporate values and ethos. Successful leaders are those who create potent leaders around themselves, groom them, keep a proper check on them -- but in the boardroom, not in the open.