With Infosys battle over 'values', yet another Indian corporate legend crashes to earth

Among the older members the Indian press corps who have covered Infosys since the late 1990s, there is an unmistakable whiff of schadenfreude on account of the controversies that now surround the blue chip software firm.

Dealing with Infosys meant putting up with a dollops of sanctimony. The company’s co-operation would be more readily available if the story was, at least in part, a nod to the messianic role of the company and its co-founder NR Narayana Murthy.

The halo around the company is long gone. Murthy’s virtuous Yudhishtra-like chariot once floating a few inches above the ground seems to have crash landed on terra firma. From being an elder statesman of Indian industry in retirement, who had earned the right to offer advice (even if gratuitous at times) to leaders political and corporate, the 70-year-old icon of middle-class India is now seen as a stoker of factionalism in the house he help build, unable and unwilling to let go.

Murthy’s broadside last week came in the form of an interview to Economic Times in which he accused Infosys of letting governance standards drop since June 2015. R Seshasayee, the former head of truck maker Ashok Leyland, was appointed as the chairman of the company’s board in the same month. Murthy’s outburst could not be construed as anything other than a frontal attack on Seshasayee’s leadership. Among Murthy’s specific gripes were:

1. The “unusually” generous severance pay offered to key employees such as Rajiv Bansal (Rs 17.8 crore in 2015) the chief financial officer, and David Kennedy ($868,250 in December 2016), the chief compliance officer, representing nearly a year’s salary. Were the massive payouts some kind of hush money, he speculated?.

2. CEO Vishal Sikka’s $11 million a year remuneration.

And 3. The board’s incompetence in helping the management in the conduct of business, and in overseeing what he felt were ethical lapses.

Several Infoscions to whom this correspondent spoke, already worried by the unseemly tug of war at a time when the Indian information technology industry is facing potentially existential crises, found the sight of their chairman answering questions at a press conference about CEO travel and takeaway bills utterly unedifying.

Conflict is denied

While chairman Seshasayee at a hastily arranged damage-control media conference in Mumbai on Monday stressed that there was no war or a turf battle between the current management and group of promoters who collectively hold some 13% of the company (the Murthy family being the largest with round 3% ownership), a sudden spurt of leaks, planted stories and the behind-the-scenes whisper campaigns originating out of Bengaluru suggest that the bitterness won’t disappear anytime soon. Within a few hours of Murthy’s dim assessment of the Infosys board, Oppenheimer Funds, an international institutional investor that has 2.7% stake in the company, offered a sunny statement backing the current management and CEO Vishal Sikka. It credited Sikka with stabilising the firm after years of competitive underperformance, arresting the record high attrition rates, and bringing about material improvements on all parameters. “With all deference to their enormous contributions, we also believe that non-executive founders need to come to grips with the reality that this is a public company,” Oppenheimer’s open letter read. “It is no longer their firm.”

“Values” is a term that figures prominently in any conversation with combatants on both sides of the Infy divide. It’s a conveniently nebulous word in such times.

“What is Infosys without its values?” thundered V Balakrishnan, a former Infosys CFO who is now one of the most prominent faces of the pro-Murthy camp. “This is a company with a $34 billion market value that we’re talking of. It always put value systems before performance. I’ve spent 22 years in the company and been its CFO. What more secrets could Bansal hold that I don’t? The Rs 18-crore payout to him had no proper explanation. First it was said there was a contractual obligation to pay the sum, in a subsequent annual general meeting it was announced that only a part of that sum was paid. Is this the way you disclose.”

The old guard invoking Infosys values seek to push a self-serving idea of a cuddly corporation, where middle-class parents wanted to see their children employed, that has turned into a profit chasing, plastic giant like another.

Infosys’ rise from a garage enterprise to global renown, and in the process helping create a whole new industry, is remarkable in itself. But Infosys’ perception as a company that could do no wrong, and an oasis of meritocracy in a country of cronies were in no small measure shaped by exemplary PR and a fawning press.

The top job at Infosys had been a merry-go-round of cofounders. Only after all of them had had a crack at it, did the company look outside for leadership talent. So much for meritocracy. As far back as in 2004, some of Infosys’ business practices such as lobbying the government for concessional land far in excess of even its long-term requirements had come under scrutiny.

“There is no doubt that Infosys handled the Kennedy and Bansal severance pay issue in a less than satisfactory manner,” said S Shriram, MD, InGovern, a firm that provides advisory support for directors on governance issues. “If indeed the promoter group had been troubled by falling standards, it should have written an open letter to the board instead of meddling privately.”

Members of the Murthy camp deny backroom meddling. Murthy himself has spoken of receiving some 1,800 emails from various stakeholders, including employees about the rot in Infosys.

Countered Balakrishnan: “The promoters had been speaking to the board since April last year. But what can we do if there is no response from the board. The promoters are forced to go public.”

By floating the names of former Infosys board members and executives such as Mohandas Pai, Balakrishnan, Marti Subrahmanyam, a New York University professor and economist Omkar Goswami as potential go-to gurus for the company, Murthy maybe fancying a return to the urheimat of unalloyed values.

Fight to the finish

“Compassionate capitalism maybe Murthy’s philosophy,” said InGovern’s Shriram. “It need not be adopted by the board as a guiding principle. Is executive compensation at Infosys which has come into renewed focus, is by and large benchmarked to peers. If you want to get the best talent in the industry, compensation has to be aggressive in some key positions.”

One person close to a sitting Infosys director likened the promoters to a gaggle of mother-in-laws who constantly carp about their bahus sitting in the verandah. “It’s like mother in laws saying we ran a tighter household, our laundry and grocery bills were lower,” he quipped.

So far, Murthy and friends have made sounded charitable in their assessment of Vishal Sikka and focussed on what they perceive to be the board’s lapses on governance. Perhaps publicly falling at patriarch Murthy’s feet quite early in his CEO stint has helped. But Infosys Kremlinologists think Sikka too is in the crosshairs. As evidence they point to an Economic Times story on Monday that links CFO Rajiv Bansal’s exit to a $200 million acquisition made under Sikka’s watch in February 2016. Among other things, the story makes the roundabout suggestion that Sikka may have sweetened the deal for the owners of Panaya, a struggling Israeli firm whose owners included Hasso Plattner. Plattner is a co-founder of SAP the German software giant who was Sikka’s boss and mentor in his previous assignment. Plattner reportedly had even plumped for Sikka to become SAP’s co-CEO but the board threw in a spanner. Given that these facts and the relationship between the Panaya protagonists were publicly known then, some in the current Infosys dispensation find it odd that the story should get a second wind now. Chairman Seshasayee at his Monday press conference reiterated that the deal had passed every test of business prudence and ethical propriety.

The big scalp the old guard is keen on is Seshasayee. The chartered accountant and Carnatic music expert from Chennai has been the recipient to the harshest criticism. Balakrishnan and Pai have openly asked for his resignation.

For Seshasayee, filling in the shoes of KV Kamath, the man who built ICICI Bank, as the chairman of a company as fabled as Infosys was never going to be easy. “The board is a complete failure and Seshasayee must bear the burden,” said a member of the pro-promoters group, going on to say disparaging things about the chartered accountant’s alleged lack of values.

From the peaks to sanctimony, it has come to this.