KEN KOYANAGI, Editor-at-large,Nikkei AsianReview 16,Nov 2017
The symbolism was impossible to miss. A year into his tenure as the chief executive of Infosys, Vishal Sikka leaned down and touched the feet of Narayana Murthy, one of the company’s co-founders and a driving force behind India’s emergence in the global technology industry. As everyone in the Bangalore auditorium that day immediately understood, Sikka, 49 at the time, was using a traditional Indian gesture to seek the blessing of his elder, the 69-year-old Murthy. “What a pleasure,” Murthy said. “What a pleasure.”
Sikka embraced his status as an outsider. He moved the chief executive’s office from Bangalore to Palo Alto, California, in the heart of Silicon Valley, to be closer to clients — and to the cutting-edge technology being developed there. He made many investment decisions from Palo Alto, including acquisitions of cloud- and AI-related companies. Sikka even looked the part of a Silicon Valley mogul, wearing a black T-shirt under a sports coat.
But the relationship between Sikka and Murthy has collapsed spectacularly since last year, culminating in a bitter — and highly public — exchange of accusations between the two men that has captivated corporate India. Murthy criticized Sikka’s pay and his use of private jets, and claimed that corporate governance standards had eroded during his tenure. Saying he could no longer run the company amid such criticism from a company founder, Sikka resigned as chief executive on Aug. 18 and left the board six days later. Three other directors followed him out the door, including the former chairman, R. Seshasayee.
Murthy’s criticisms haven’t let up since Sikka’s resignation. Speaking to shareholders on Aug. 29, he detailed his “concerns as a shareholder” over how the company’s board members approved a severance package worth roughly 170 million rupees ($2.65 million) for former Chief Financial Officer Rajiv Bansal, who left the company in October 2015.
Then he quoted a “whistle blower” who sent an open letter to the chairman of the Securities and Exchange Board of India in February. The letter alleged the existence of a doubtful matter surrounding Infosys’ $200 million acquisition of Israeli cloud-based IT service provider Panaya in 2015, and suggested the generous payout may have been meant to silence the ex-CFO.
It was a harsh indictment by the founder of a public corporation against its board, but Murthy took one more swipe at the departed board members. “Now we can all sleep better,” he said, referring to the interim appointment of another Infosys co-founder and former CEO, Nandan Nilekani, as chairman.
Many old Infoscions, as the company’s employees call themselves, back Murthy’s argument. V. Balakrishnan, a former Infosys chief financial officer who now runs a venture capital firm, said all the remaining board members should be replaced. “It was fine to have a technologically strong CEO. The problem was that the board failed to uphold the core values of the company,” Balakrishnan said.
Investors appear unconvinced, however. Infosys’ share price fell sharply after Sikka announced his resignation as CEO, then recovered after Nilekani was appointed as new chairman. But the stock has yet to return to the level before Sikka’s departure, implying market support for his leadership.
The boardroom drama and management uncertainty — the company has yet to name a permanent replacement for Sikka — comes as Infosys and the rest of the Indian IT services sector face daunting technological and political shifts. Sikka came into the CEO job warning that the “low cost, mundane” software services that were the core business for Infosys and its rivals — including market leader Tata Consultancy Services and Wipro — are being challenged by disruptive technologies such as AI and cloud computing. Those forces are accelerating, as are protectionist sentiments in the U.S. and elsewhere that pose a threat to offshore technology services companies like Infosys and Tata.