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Mr Murthy, yes, it is difficult to let go

Source | LinkedIn : By Prasanna Pahade

After the boardroom battles in Bombay House, the Tata group headquarters, the action has shifted down south. Infosys. The hallowed, bell weather IT company in Bangalore.

Mr Murthy along with his co-founders have had a strong influence on the way India and IT companies have been perceived by the world. However there comes a time for every visionary leader to pass on the baton. And not many of them are able to do so. Indian IT companies rode the Y2K wave and the subsequent outsourcing from the western world to India. As the companies kept on giving good financial results, the underlying sustainability issues – succession planning for the leaders, good governance etc take a back seat.

Mr Murthy is a respectable business leader and has been honoured by various national and international organisations. It is unfortunate that he is now embroiled himself in a controversy at the fag end of his career. May be Mr Tata and Mr Murthy will have a lot to talk to each other if and when they decide to.

Current ownership of promoters in Infosys is only 16%. Close to 60% is with the FIIs and FIs. So, how much influence should the promoters have? Given that they have sold/diluted their stakes over the period, should they be called as promoters? Anyways, this is for SEBI to decide.

Mr Murthy has raised some questions about corporate governance at Infosys and inefficiency of the board. I am not a shareholder of Infosys nor am I privy to any other information. Therefore, Mr Murthy could be right. But if you look at the questions that are getting raised by the promoters, there are more questions for them to answer. Famously, Mr Murthy himself had made a statement that

Indians have the highest ego per unit of achievement

Questions about appointment of Ms. Punita Sinha, severance package to Mr Rajiv Bansal, variable pay to Mr Sikka are getting raised now. All these matters require shareholder approval. If promoters had a point of view on these, why it were not raised at that point in time?

Mr Murthy has raised questions regarding the functioning of the board. It will be useful to remember that the board of Infosys did the following in the past:

  • Accepted the whims of promoters when turn by turn the position of CEO and Chairman was given to promoters. (All promoters had ownership in the company. But that doesn’t necessarily qualify them for the position of CEO and Chairman.)
  • In the ‘Murthy Returns’ saga, Mr Rohan Murthy was appointed as EA to Mr Murthy.

It will be interesting to know whether any independent director had raised a concern on any of these matters as it speaks a lot about succession planning (or lack of it) in a company of Infosys’s stature.

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