Tussle at Infosys may lead to changes in companys board

The Infosys founders' discontent with matters of governance at the company could lead to changes on the board, according to several analysts that TOI spoke to. This could be one major step towards also resolving the ongoing tussle in the firm.

The promoters have sought the appointment of a co-chair and replacement of the head of the nominations and remunerations committee. Co-founder N R Narayana Murthy has proposed NYU Stern School of Business professor Marti Subrahmanyam as co-chair. Murthy has also suggested that board member D N Prahlad should replace Prof Jeffrey Lehman as the head of the remunerations committee.

The founders, who own 12.75% stake in the company , have been particularly critical of the over Rs 17-crore severance payment to former CFO Rajiv Bansal and the alleged absence of proper disclosure of why the payout was made when senior executives who had left before Bansal had not received any such payment. They have blamed the board chairman and the head of the remunerations committee for not going through due processes.

Phil Fersht, CEO of IT consulting firm HfS Research, is among those who expect there will be new faces and replacements over the next few weeks.He thinks Subrahmanyam, who was on Infosys' board earlier, will come back. “The battle between the legacy founders and the new blood, to pivot the Infosys strategy , is reaching bo iling point. The firm has to start focusing 100% on shareholder value and dictating new governance policies to make this happen. Until they get the governance set right and all the key stakeholders aligned, they will keep struggling on a go-forward strategy . Changing the roster at the top is inevitable and necessary ,“ he said.

Peter Bendor-Samuel, CEO of Everest Group, said the struggle to determine the board makeup is clearly playing out. “The outcome will determine if the current management team and digital-first strategy will continue. The board must decide which strategy to back and then move forward with a board which reflects this strategy . If major board changes are made, we can expect it is a vote for a different path forward for Infosys. One way or the other, the board needs to decide on its path forward as a protracted debate will start to affect Infosys' morale and performance,“ he said.

In an interview to TOI last week, Subrahmanyam said he is willing to help if he is called upon to do so. Shriram Subramanian, ma naging director of corporate governance firm InGovern, said there were indeed transgressions on the part of the current board. “I hope the company realises that there is a need for a change of methods. (CEO Vishal) Sikka, for one, needs to act with more maturity as a leader.Why have they been so less transparent on sackings of Bansal and Kennedy (former legal counsel David Kennedy)? These are not problems that will shake the company to the core, but show that values and principles were not right,“ he said.

Much is also likely to depend on the views of other major sha on the views of other major shareholders in the company . Given the relatively good performance of Infosys under Sikka, they are unlikely to favour any dramatic changes. Already , one of the largest shareholders -Oppenheimer Developing Markets Fund -has written a letter (a copy of which is with TOI) in support of Sikka and the board. “The bottom line is that, in our opinion, Dr Sikka has achieved much in his tenure as the first non-founder CEO. After many years of internal volatility and competitive under-performance, it is encouraging to see that Vishal has stabilised the core and articulated a clear -and appropriate -longterm strategy to help Infosys thrive amid industry disruption,“ said Justin Leverenz, portfolio manager of the fund. “We would strongly encourage the board of directors to restrain divisions in the firm and contain inappropriate interventions by non-executive founders. Let Vishal do what he was hired to do, without distractions. And appraise him on his efforts.“

Source: Techgig