Why Infosys-Sikka tussle will not be another Tata-Mistry story

technology | 11 February 2017 5:27 AM (UTC)
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Highlights
  • Infy founders say they are quite happy with Vishal Sikka and that he is doing a good job
  • The Infosys founders have a problem with the governance and not the performance or growth strategy under Sikka.

 

Judging by how things are going and accusations are flying fast, the market is waiting for a showdown. Some have even compared this episode to the recent Tata-Mistry war which saw the ouster of chairman Cyrus Mistry in October last year. It was but natural that comparisons would be drawn as both companies are heavyweights in their field and the spilling of boardroom talk into public domain led to countless speculations being made.  

 

However, expecting CEO Vishal Sikka to go the Mistry way is not a probability. In an interview to CNBC 18, Infosys founder NR Narayana Murthy made his opinion clear. He said, “We (founders) are quite happy with Vishal Sikka, he is doing a good job.”

 

So where the speculation of Sikka being shown the door stems from the similarities with the Cyrus Mistry case. In the case of Tata, Ratan Tata was unhappy with the way things were being run under Mistry’s care dealing with governance, management policies and compensation. With Infosys, the founders, including Narayana Murthy have raised questions about ‘corporate governance’, the deviation from the founders’ good policies and certain financial decisions taken by the Board regarding compensation and severance pays of high-ranking employees.

 

In both cases, the respective heads took over the company at a time when it was running in loss, they had a lot of clean up to do. Under Mistry’s chairmanship, net profit at TCS, soared. It jumped about 75% between March 2013 and March 2016, while its revenue grew by 72%.

 

Also read: Possible lack of clarity on freedom in Tata crisis, says expert

 

Murthy had brought in Vishal Sikka as CEO after a major organisational overhaul and within a year, the man with no experience of heading a major company like Infosys proved that he was in it for the long run.

 

The Infosys founders have a problem with the governance and not the performance or growth strategy under Sikka. The possible explanation why Sikka’s CEO position could be under threat because of the events of last year February when the  company’s board decided to grant a two-year extension till 2021 to chief executive Vishal Sikka. He was brought in, in 2014, for a five-year term. Apart from this, a raise in the compensation package to the CEO according to variable pay is what concerned the promoters and co-founders of Infosys.

 

Sikka meanwhile,

 

Also read: 8 ways how CEO Vishal Sikka turned Infosys back into a leader

 

In interviews to various media websites and newspapers, Murthy has mentioned the need for a Board overhaul. When asked by Economic Times, how the company could redeem itself in this matter, Murthy’s suggestion was to the Board. He suggested that there must be several initiatives to improve trust of shareholders in the company and the board.

 

First is for the chair of the nomination and remuneration committee and the chair of the board to accept their mistakes with regards to the compensation and severance packages. He also emphasised that the some of the good policies followed pre-Sikka should be brought back and that the Board should from time to time  consult  experts like Mohandas Pai, Bala, Marti Subrahmanyam and Omkar Goswami in finance and good governance; people like Nandan Nilekani in sales and marketing; people like Kris and Sharad Hegde in technology and Finacle; people like Dinesh and Shibu in delivery expertise.

 

Also read: 6 reasons why Narayana Murthy is unhappy with Infosys board

 

What can be gathered at this juncture is that that this divide between Sikka and Murthy is more to do with ideology and beliefs, wherein the founders want the company to run in a particular fashion, more in tune with the way they conceived it to be. When it comes to the Founders share in the company also, they are at a disadvantage and moreover the founders had willingly walked away from the company, handing it over for new governance. With Cyrus Mistry, he was immediately booted out.

Sikka on his part has always maintained that changes are inevitable and in order for a company to advance certain changes need to be made in many processes, which may oppose previous ideology. Some have even called Sikka a replica of Murthy in terms of mannerisms and when it comes to business. So Sikka will only have to prove his decisions in case the question comes to his being removed as Infosys's CEO. 

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