by admin | May 25, 2021 | Opinions
By Amit Kapoor,
Infosys is yet again in the news for all the wrong reasons. The poster child of the Indian IT industry just cannot seem to stabilise its ship even after a decade of consistently losing market share under different leaders, mostly comprising of its co-founders. In fact, Vishal Sikka was the first non-founder CEO for the company and was the first one successful in bringing stability to the companys market performance vis-à-vis rivals like Tata Consultancy Services (TCS) since it had begun deteriorating almost a decade ago.
The real story in the Infosys saga, however, does not lie in the intricacies of the company’s boardroom battles but the larger malaise that it highlights within the Indian corporates as a whole.
First, the succession planning of Indian corporates seems to be a serious issue. While the concept of succession planning exists in India, bluechip corporates have been struggling to successfully put it into practice. Sikka’s abrupt exit puts the company in a state of disarray. The Indian system of succession planning within corporates differs largely from their global counterparts, which begin to hunt for a successor quite a few months in advance.
Second, there seems to a lack of clarity on the role that different stakeholders play in a company. Promoters in companies need to define their roles as executives, board members and shareholders. Problems like the one in Infosys arise when promoters overstep their roles and assume different responsibilities at different points of time. The founders at Infosys seem to be having a tough time letting go of their control over the company and often cross jurisdiction is the result. After N.R. Narayana Murthy stepped down as CEO in 2002, three co-founders succeeded him — mostly unsuccessfully in maintaining the company’s growth trajectory. Murthy’s vocal interference in the company’s workings and Nandan Nilekani’s return following Sikka’s exit points to an utter unwillingness of handing over control to an “outsider”. Founders assuming control anytime they feel uncomfortable with operations undermines decisive leadership and puts the stability of the company under threat.
Third, corporate governance seems to be quite problematic among Indian firms. The fact that the issue has arisen in a firm that made the concept popular in India is especially concerning. When the acquisition of Israeli solutions provider Panaya was questioned by Murthy, a shareholder in the company, it behoved the board to address the concerns to the satisfaction of its shareholders. Transparency is the key to ensuring the highest standards of corporate governance. In the board’s defence, they did call for an independent inquiry into the matter and found no wrongdoing. However, it fell short of releasing the complete reports of the investigation as demanded by Murthy.
All these factors — succession planning, clarity of roles and corporate governance — play a crucial role in determining the sustainability of large firms and if they become a ubiquitous problem, among Indian corporates, their survival might come under threat. There is also a much larger problem that springs out of the tendency of the old guard to not let go of their companies – the ability to innovate.
Infosys was slowly becoming irrelevant with back office processing and IT support work due to large scale automation. Rapid automation calls for a move into emerging sectors like Artificial Intelligence (AI) and robotics for IT firms and Infosys was losing ground here. Sikka attempted venturing into these disruptive sectors and the founders who were accustomed to making profits through labour arbitrage did not feel comfortable with such moves.
This is a typical problem with large firms. Innovation does not come easy to them. In most industries, innovators are usually “outsiders” in some sense. Either it comes from a new company whose founder has a non-traditional background or from existing companies through senior managers who are new and unfamiliar to the industry. Such sets of people are usually more able to identify new opportunities and are bolder in pursuing them as well. This is the biggest problem with Infosys and results in slow-paced innovation within the company, which is hurting the company itself in the long run. An innovation handicap will mark the company for its slow demise in an industry as fast paced as IT. On a larger scale, it also damages the country’s ability to innovate as a whole, which is quite worrying for its relevance on the world stage.
Therefore, the crisis in Infosys isn’t just limited to the company itself. The Indian corporate sector needs to take copious notes as it unfolds and learns what not to do in order to ensure its sustainability. Also, it must learn not to fall into the trap of sticking to old ideas at the cost of innovation.
(Amit Kapoor is chair, Institute for Competitiveness, India. The views expressed are personal. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya. Chirag Yadav, senior researcher, Institute for Competitiveness, India has contributed to the article)
—IANS
by admin | May 25, 2021 | Corporate, Corporate Buzz
Bengaluru : Software major Infosys has gone through a churn over the months, as its boardroom battles over a spate of issues led to the exit of its first non-founder executive Vishal Sikka on August 18 and the return of its co-founder Nandan Niliekani as non-Executive Chairman on Thursday.
Among the issues red flagged by the promoters, especially N.R. Narayana Murthy were erosion in corporate governance, huge salaries to top executives, costly acquisition (Panaya) and a large severance package to an ex-CFO.
February 9: Murthy expresses concern over governance issues in the Board.
February 13: Board denies rift with Murthy on governance issues, defends Sikka, acquisition of Panaya and high severance pay to ex-CFO Rajiv Bansal and General Counsel David Kennedy.
February 20: Board refutes an anonymous whistleblower’s charges on Panaya deal in February 2015.
February 21: Sikka attacks media for targeting company, employees and him to the point of harassment.
February 23: Board hikes salary of Chief Operating Officer Pravin Rao, elevated as Interim CFO and Managing Director on August Friday till March 31, 2018.
April 13: Independent Director Ravi Venkatesan appointed as Board Co-Chairman and lowers revenue guidance for fiscal 2018.
June 1: AMurthy tells IT honchos to take less salary and avoid layoffs.
June 13: AInfosysAterms media coverage, activist investors as risk factors.
June 24: co-founders keep away from stormy Annual General Meeting, (AGM).
July 17: Murthy regrets quitting asAInfosysAChairman in June 2014.
August 18: Sikka resigns as CEO & MD, appointed Executive Vice-Chairman till March 31, 2018, Board blames Murthy for Sikka’s exit, appoints Rao as Interim CEO and MD, company’s stock crashes 10 per cent on BSE.
August 19: Announces buyback of 11.3 crore shares at Rs.1,150 each.
August 24: Board appoints co-founder Nandan Nilekani as non-Executive Director, Board Chairman R. Seshasayee and Co-Chairman Ravi Venkatesan, Sikka and two Directors Jeffery Lehman and John Etchemandy resign.
—IANS
by admin | May 25, 2021 | Corporate, Corporate Governance, Opinions
By Amit Kapoor,
Vishal Sikkas exit from Infosys seems to have been accentuated by the streak of comments made by co-founder N.R. Narayan Murthy. The comments bordered on complaints, raising issues of corporate governance and at time accusations. The episode, like a soap opera with significant twists and turns, has been played in public glare over the last few months.
The resignation has had its first casualty by way of wiping off the value of Infosys stock on the bourses. The impact was close to Rs 22,000 for Infosys and Rs 700 crore of mark down for Murthy’s stock. The episode rakes up significant issues about corporate governance and transparency, the agency problem (precisely the question of control between shareholders and professional management), important issues about the strategy of Infosys and the pressure to perform in a volatile global environment
1. VUCA Environment. The pressure seems to have been built on the enterprise while operating in a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment. Today’s business environment is bombarded with ideas countering the notion of globalisation and the negative impact of free trade. The benefits of globalization, driven by the free movement of goods, services, and information are countered by deeply seated myths and assumptions which smack right in the face of trade theorists. To top it all, the pressure has been further created by the current US administration’s views on outsourcing and immigration. To bluntly put it, the world is in the throes of economic nationalism.
2. Business Model. The archaic business model of Infosys, driven by the idea of scale and labor arbitrage has come under severe strain. The debate for years has been the innovative potential of Infosys and the value the enterprise can create. To put this into perspective, we must look at the trajectories of growth, impact the firm has had on the global industry et al. The enterprises to compare here are Microsoft and Infosys who effectively started at the same time and have had trajectories of growth that are significantly different.
I must as well admit that I have not been a great fan of Infosys of the past as it was built on the idea of exploitation of labor with abysmal levels of productivity numbers for its engineers. This is where the present team of Vishal Sikka, Ravi Venkatesan et al have been working quite hard and making admirable strides on redefining the business model. The effect of the new business model was as well visible through the rising productivity numbers of the enterprise and its talent.
3. Corporate Governance and Transparency. This issue needs to be assessed very carefully. It is clear that Murthy looks at Infosys having an impeccable record on governance and transparency. No one can find a reason to not follow the highest standards as espoused by Murthy. The practice needs to be followed to the hilt, though the issues need to be discussed within the confines of the boardroom. This discussion becomes important as Murthy cannot be seen as an activist shareholder who is at loggerheads with the management.
The episode leads us to look deeply at the issues of corporate control in the country. It is not the first time that we have had battles fought between shareholders and professional managers. The Infosys saga can as well be seen through the lens of conflict of interest and control. To say the least, a conflict of this nature will not only undermine but has the potential to ruin the enterprise. It cannot be ignored that Murthy is the co-founder and has had a great stake in building the enterprise — though the action of making the grievance public seems to have had a counterproductive effect.
The situation at hand demands an immense level of maturity by all parties involved. This would require all parties concerned to tone down the rhetoric, stand down from their respective positions and sit across the table to discuss the issues. If this is not done on an immediate basis, the loss would entirely be felt by Infosys, the poster boy of Indian IT Industry, that I am sure wouldn’t liked by Murhty, the board or Infosys stakeholders. We must keep in mind that all organisations need to change, evolve their business model and adapt to the new realities. This will certainly have to be done while keeping in mind that the core of Infosys is kept intact which in itself seems to be jeopardised at the moment.
(Amit Kapoor is chair, Institute for Competitiveness, India. The views expressed are personal. He can be contacted at amit.kapoor@competitiveness.in and tweets @kautiliya.)
—IANS
by admin | May 25, 2021 | Business, Corporate, Corporate Buzz, Large Enterprise
Bengaluru : Global software major Infosys Ltd on Saturday announced it buy back 11.3 crore shares of Rs 5 face value at Rs 1,150 per share via a tender offer.
“The Board has approved a proposal to buy back 11.3 crore equity shares of Rs 5 face value from the shareholders at a price of Rs 1,150 per share for an amount not exceeding Rs 13,000 crore,” said the IT major in a regulatory filing on the BSE.
The offer size is 20.51 per cent of the total paid-up capital and free reserves, aggregating up to 11.3 crore shares or 4.92 per cent of the equity shares.
—IANS
by admin | May 25, 2021 | Corporate, Corporate Buzz
Vishal Sikka
Bengaluru : Vishal Sikka on Friday resigned as the Chief Executive Officer (CEO) and Managing Director of global software major Infosys Ltd, the company announced.
“The Board of Directors has accepted the resignation of Vishal Sikka as the Managing Director and Chief Executive Officer with immediate effect at its meeting held on Friday,” said the IT major in a statement here.
The Board, however, appointed the 50-year-old Sikka as Executive Vice-Chairman and will hold office until the new CEO and MD takes charge by March 31, 2018.
It also appointed Chief Operating Officer U.B. Pravin Rao as the interim CEO and MD, reporting to Sikka under its overall supervision and control.
“Sikka will continue to focus on strategic initiatives, key customer the relationships and technology development. He will report to the Board,” noted the statement.
Sikka will receive an annual salary of $1 (Rs 64) during his tenure as Vice Chairman. Any equity awards held by him that remain outstanding and shall continue to vest (and, in the case of stock options, become exercisable) in accordance with their terms.
“The Board thanks Sikka for his outstanding leadership and extraordinary contributions during a period of rapid evolution in this industry,” the statement added.
Sikka joined Infosys on August 1, 2014. He previously served as Executive Director at the German software major, SAP.
—IANS
