We saw a surprising development in the Indian IT industry earlier this week when the CEO of Infosys, Mr Vishal Sikka, resigned protesting against personal attacks by founders of the company which have caused serious distraction in the performance of his duties as the CEO of the famous IT company. The Board of Infosys was fully supportive of the CEO during the onslaught mounted by the founders, led by Mr Narayana Murthy, the ex Chairman and CEO, and one of the co-founders.
Mr Sikka’s resignation sent the Infosys stock down by over 10%, wiping out almost USD 5B in its market capitalization. The market had a strong belief in the value that Mr Sikka brought to his job, and his strategy of moving Infosys’ business from traditional IT outsourcing to cloud, big data, social media driven business, transforming Infosys to take on the new digital challenges offered by the market.
While there are many commentaries (mostly supportive of Mr Sikka and the Board), it is important to learn a few things from this episode. Once the founders have handed over the CEO job to a professional, and have received assurances from the Board of Directors that the essential ethos and values of the company will be maintained and strengthened further, they should stay completely away from the running of the business. If there are issues with the corporate governance aspects of the business, there are ways of approaching and handling the same with the Board, instead of washing the dirty linen in public media glare.
Of course, it is to the credit of the founders who have built up a strong foundation for Infosys over three decades of pioneering work, that such public damage did not cause harm to the company or its business or its stock price (in a major way). Things were going on normally, despite all the attacks.
But Mr Sikka now says that the attacks by Mr Murthy turned very personal over the past couple of weeks. And, the distraction to the business was too much, leading him to make a drastic decision.
His resignation is a loss to Infosys as well as to the Indian IT industry. He was setting new benchmarks in strategic business transformation at Infosys, and was a thorough professional who made decisions without undue influence (from what can be gathered). He had the ears of the Board and the stock market.
Mr Murthy is an iconic figure in the industry and is a well-recognized name globally as well. There must be something which has disturbed him and his co-founders in a big way. But then, the way the attacks have been mounted on Infosys is not an acceptable form of protest. Seasoned businessmen and leaders do it in a different manner, without public disaffection and published letters via the media.
I disagree with Mr Murthy’s tactics, and won’t be surprised if the damage to Infosys is long-lasting. It would be very difficult to find a CEO of the calibre of Mr Sikka who would be willing to take up the CEO job now.
When I entered the IT industry in 1987, I knew only of Mr FC Kohli of TCS and Mr Azim Premji of WIPRO. I also knew about Mr Shiv Nadar of HCL. Infosys was not known at that time. But, in the Nineties Infosys built up its business nicely, garnering a serious reputation for integrity and values (similar to WIPRO). For the past nearly two decades, the stock market has always looked at Infosys as a trend-setter with conformance to global principles of accounting and transparency.
That legacy is under threat now. Hopefully, the Board will be able to make the right choice of the CEO. If it is an internal candidate from the old times, the market will assume that the founders are taking back control. And, if it is an external candidate bold enough to accept the challenge of dealing with the founders, then it has got to be a person of huge stature who cannot be trifled with.
Let us see how this plays out.
20th August 2017