Narayana Murthy, the co-founder of Infosys, told his fellow shareholders that his main concern was the lack of corporate governance at the IT services company.
Narayana Murthy is currently facing criticism for the resignation of Vishal Sikka, who joined Infosys as CEO and MD after working with SAP. Vishal Sikka, according to media reports, is likely to join HPE as chief technology officer (CTO).
Narayana Murthy said an unusual agreement to pay an excessive sum as severance package to ex-CFO Rajiv Bansal in October 2015 and response from the Board was not in line with the corporate governance practiced by the earlier Boards.
Following the resignation of Vishal Sikka, Infosys has appointed UB Praveen Rao as the interim CEO. Infosys has also brought back ex-CEO Nandan Nilekani as the non-executive chairman of Infosys to revive the technology outsourcing company.
“I am confident Nandan Nilekani will determine whether the members of the current Board who were involved in the events alleged by the whistle blower exercised their proper and expected role in governance; and that he will take appropriate corrective actions,” Narayana Murthy said.
Some firsts in corporate governance
# The first company in India to give quarterly reporting
# First in India to give topline and earnings guidance on a quarterly and yearly basis
# First in India to adopt the stringent disclosure standards of US GAAP in 1995 much before NASDAQ listing
# First in India to publish what were considered company secrets in the 1990s like data on employee attrition, on segmentation of revenue by geography and industry, on customer concentration and on billed man-months
# Disclosed bad news like losing a large customer contributing 25% of revenue due to price negotiations in 1995
# Appointed a lead independent director for the first time in Indian corporate history.
# First to voluntarily institute annual directors’ evaluation
# First to introduce a retirement policy and a fixed term for all directors
# First to produce a governance report on all board committees.
# First to follow Sarbanes Oxley Act among all non-US filers
The company achieved a CAGR of 53.9 percent in market capitalization over 21 years between 1993 and 2014.
During his brief tenure of 15 months in 2013, Infosys doubled the revenue growth rate from 5.8 percent in 2012 – 2013 to 11.6 percent in 2013 – 2014 (not achieved since then).
Infosys introduced innovations and enhanced productivity to improve the operating margin by 200 basis points by Q4 of 2013 – 2014 (not achieved since then).
Narayana Murthy said the management team and professionals at Infosys will rally behind new chairman Nandan Nilekani and bring back the glory days.
“You would all agree that the rejuvenation of the Board has already begun with the resignation of R Seshasayee and some other board members,” Narayana Murthy said.
The now 50-year Vishal Sikka, who never worked as a CEO earlier, was the first outsider to join and accelerate the business growth of Infosys. Narayana Murthy indicated that Vishal Sikka could not deliver as compared with his brief tenure when he returned to work with Infosys.
But Narayana Murthy did not admit that the resignation of Vishal Sikka was the outcome of the pressure from him. Because Narayana Murthy wanted immediate changes in corporate governance he sought explanations from the earlier CEO.
Image source: Deccan Herald
