Swarajya Logo
Swarajya Logo
Politics States Economy Society Business Culture Infra Defence World Books Ideas Science Technology Heritage Archives Legal Movies Sports
  • Our Views
    Politics States Economy Society Business Culture Infra Defence World Books Ideas Science Technology Heritage Archives Legal Movies Sports
  • Magazine
  • Store

About Swarajya

Swarajya is a publication by Kovai Media Private Limited.

Swarajya - a big tent for liberal right of centre discourse that reaches out, engages and caters to the new India.

editor@swarajyamag.com

Useful Links

  • About Us
  • Subscriptions Support
  • Editorial Philosophy
  • Press Kit
  • Privacy Policy
  • Terms of Use
  • Code of Conduct
  • Plagiarism Policy
  • Refund & Cancellation Policy

Useful Links

  • About Us
  • Subscriptions Support
  • Editorial Philosophy
  • Press Kit
  • Privacy Policy
  • Terms of Use
  • Code of Conduct
  • Plagiarism Policy
  • Refund & Cancellation Policy

Participate

  • Contact Us
  • Write for us
  • Style Guide
  • Jobs

Stay Connected

  • Artboard 2 Copy 6Created with Sketch.
    Artboard 2 Copy 10Created with Sketch.
    Artboard 2 Copy 7Created with Sketch.
    Artboard 2 Copy 9Created with Sketch.
  • Andriod Logo
  • IOS Logo

Business

Why A Proxy War Between Murthy And Infosys Board Is Not Such A Bad Thing

R JagannathanWednesday, August 23, 2017 11:36 am IST
Murthy addressing a press conference in Bangalore. (Hemant Mishra/Mint via GettyImages)  
Murthy addressing a press conference in Bangalore. (Hemant Mishra/Mint via GettyImages)  
Murthy addressing a press conference in Bangalore. (Hemant Mishra/Mint via GettyImages)  
  • A proxy war for Infosys’ soul may create short-term uncertainties for the company’s shareholders, but it will settle the issue once and for all.
  • If Murthy wins, he will get a year or two to set things right and walk off into the sunset. If the board wins, it will gain credibility and new confidence among investors.
  • The board of Infosys, which just saw its chief executive officer (CEO) resign following frustration with the carping by iconic founder N R Narayana Murthy, looks likely to be embroiled in a war of perceptions with ordinary shareholders and institutional investors in the company.

    While Murthy is addressing investors in a conference call and seeking changes in the board, the board itself is said to be reaching out to institutional investors to assure them that they are in control. One cannot rule out a proxy fight in the company’s forthcoming shareholders’ meeting.

    It is difficult to predict who will win this battle. While it is likely that institutional investors will be cross with Murthy for precipitating a sharp fall in share prices, the chances are smaller shareholders and professionals will be more on Murthy’s side, as this perception survey by Kantar IMRB-Crownit suggests.

    It is a war worth waging on both sides, and will ultimately strengthen the company. Unresolved standoffs are even more damaging to the future of a company.

    The problem for the board is that even if it wins the proxy battle, the wounds inflicted by Murthy will remain raw. What this implies is that it would be better off making the board level changes that Murthy wants rather than just trying to outmanoeuvre Murthy on his own turf of corporate governance.

    On the Murthy side, he has to accept that this state of affairs owes as much to his own failures as the board’s. These failures relate both to his extended tenure as Infosys chairman, and what he did later, when he returned to the company in 2013 as an interim measure, when confidence in the company was dipping among investors due to weak performance by his successors.

    Murthy made three big mistakes during his two tenures at Infosys. He should not make the fourth by avoiding responsibility for the fight he began last year by leaving it halfway. He has to see it through to its logical conclusion.

    Murthy’s first mistake was the decision to give all his fellow co-promoters a shot at the chairmanship, when not all of them may have deserved the honour. Not every founder makes for a good CEO. After Murthy and Nandan Nilekani, the two promoters who followed – Kris Gopalakrishnan and S D Shibulal – were hardly inspired choices. This was not nepotism, but certainly not enlightened professional choices either.

    Second, when he returned to the company in 2013, he inducted his son in a key executive position under him, which shifted focus from the company’s professional succession line-up to the chairman’s office. This move probably did as much to denude the company of future CEO material than anything Vishal Sikka did in his tenure from 2014. This was Murthy’s second big mistake.

    Third, and this is a mistake Murthy himself admits to, he left the company just at the point of transition to an outside CEO who had no clue as to the internal culture of the company that Murthy built. Murthy’s exit was followed by the exit of K V Kamath as chairman, which meant that the ‘Strong-Chairman-Weak-CEOs’ order we saw under Murthy and the promoters who held the top job after Nilekani, got reversed into a ‘Strong-CEO-Weak Board’ reality. This was an invitation to instability.

    A company needs both – a strong board and a strong CEO. But the net result of Sikka’s exit is that Infosys is now in a weak-board-weak-substitute-CEO situation. This is untenable.

    Examples from other companies and groups show that whenever an iconic promoter or chairman exits, there can be instability unless the person continues to be involved in guiding the organisation through the initial years of the transition of power.

    In the Tatas, when Ratan Tata left the reins in the hands of Cyrus Mistry, the only way it could have worked was if he had clearly established the norms for the transfer, and continued to guide Mistry through the first three years. Instead, he left Mistry to his own devices, and ended up having to return. But this time he is doing it right, by inducting the talented N Chandrasekaran as Tata Sons head. Chandra has the competence needed to succeed, and, more important, the confidence of Tata.

    Yogi Deveshwar, who retired as executive chairman of ITC last February, and A M Naik, chairman of L&T, who bows out as executive chairman shortly, will be remaining on the boards of their respective companies during the period of transition.

    Murthy, unfortunately, was not around when Infosys was transitioning from a promoter-driven company to a professional CEO based in the US. Having now started the battle to put Infosys on the path to improved corporate governance, he cannot run away from battle however hard it may be for him at age 71. You can’t mutter and complain and destabilise a management and not take responsibility for the resultant damage.

    A proxy war for Infosys’ soul may create short-term uncertainties for the company’s shareholders, but it will settle the issue once and for all. If Murthy wins, he will get a year or two to set things right and walk off into the sunset. If the board wins, it will gain credibility and new confidence among investors. It will be able to get rid of the impression that it is a pushover. It will be able to make the right choice on the next CEO, and make sure he delivers to plan.

    Right now, the board is neither here nor there.

    Tags
    shareholders
    Investors
    corporate governance
    Infosys
    Nandan Nilekani
    Vishal Sikka
    K V Kamath
    Kris Gopalakrishnan
    N R Narayana Murthy
    Board
    S D Shibulal

    Comments ↓

    An Appeal...


     

    Dear Reader,

     

    As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

     

    Our business model is you and your subscription.  And in challenging times like these, we need your support now more than ever.

     

    We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

     

    Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

    Get Swarajya in your inbox.


    Magazine


    Swarajya Magazine Cover Image
    Merchandise

    Merchandise


      Politics

      'Crooked View That Bhartiya Culture Can Be Promoted Only When Hindu Marries Muslim': Kerala Muslim Leader As He Slams CPM

      'Crooked View That Bhartiya Culture Can Be Promoted Only When Hindu Marries Muslim': Kerala Muslim Leader As He Slams CPM

      Bhuvan Krishna
      7h

      No Question Of ‘Equitable Treatment’ To US, Canada In Alleged Assassination Plots Against Khalistani Terrorists: EAM Jaishankar

      Swarajya Staff
      9h

      Revanth Reddy Sworn In As Telangana's New Chief Minister; Sonia, Rahul And Priyanka Attend The Swearing-In Ceremony

      Swarajya Staff
      10h

      Economy

      Enough Of Big Bang Reforms? No Major Announcements In Next Budget, "Wait Till July 2024", Says Nirmala Sitharaman

      Enough Of Big Bang Reforms? No Major Announcements In Next Budget, "Wait Till July 2024", Says Nirmala Sitharaman

      Nishtha Anushree
      9h

      ₹58,378 Crores! Govt Set To Open Taps On Additional Welfare Spending With 2024 In Mind

      Swarajya News Staff
      18h

      India Anticipated To Be Fastest Growing In Next Three Years, Set to Become Third Largest Economy By 2030: S&P

      Nishtha Anushree
      2d

      Defence

      India's Strategic Forces Command Conducts Training Launch Of Agni-1 Short Range Ballistic Missile

      India's Strategic Forces Command Conducts Training Launch Of Agni-1 Short Range Ballistic Missile

      Ujjwal Shrotryia
      5h

      Six More Pakistani Terrorists Added To Kill-List As 'Mysterious Shootings' By 'Unknown Gunmen' Continue Unabated

      Swarajya Staff
      6h

      On This Day, In 1971, Army And Air-Force Conducted India's First-Ever Heli-Lift In The Bangladeshi City Of Sylhet, Hastening The Surrender At Dhaka

      Ujjwal Shrotryia
      8h

      World

      "Would Want Them To Face Legal System": MEA On Pakistan-Based Terrorists Being Killed By 'Unknown Gunmen'

      "Would Want Them To Face Legal System": MEA On Pakistan-Based Terrorists Being Killed By 'Unknown Gunmen'

      Nishtha Anushree
      6h

      Indian Ambassador Met Eight Navy Veterans Sentenced To Death In Qatar, Two Appeal Hearings Till Now: MEA

      Nishtha Anushree
      7h

      U-Turn At UPenn, Harvard: After Outrage, Presidents Of US Varsities Say Call For Genocide Of Jews On Campuses Unacceptable

      Swarajya Staff
      13h

      Culture

      ‘Garba Of Gujarat’ Declared As Intangible Heritage By UNESCO

      ‘Garba Of Gujarat’ Declared As Intangible Heritage By UNESCO

      Arun Kumar Das
      16h

      Gujarat's Garba Is Now In List Of UNESCO Intangible Cultural Heritage of Humanity

      Swarajya News Staff
      18h

      'Celebrate At Home': Champat Rai Of Ram Janambhoomi Trust Urges Hindus Not To Visit Ayodhya On 22 January

      Bhuvan Krishna
      3d
      States

      infrastructure


      Amit Mishra
      1

      Gujarat Government Partners With AAI For Building 11 New Airports, PM Modi's Hometown Also Under Consideration

      2 Mins Read
      Amit Mishra
      2

      Mumbai: Six Bidders Evince Interest To Build Rs 16,621 Crore Coastal Road Extension, Linking Versova To Dahisar

      2 Mins Read
      Amit Mishra
      3

      Char Dham Connectivity: Controversial Road Widening Project Did Not Need Environment Assessment, Centre Tells Parliament

      2 Mins Read
      Arun Kumar Das
      4

      Chugging Along A 112-Year-Old Railway Line With Rich Iron Ore Legacy — Ground Report From Tatanagar To GUMI In Odisha

      3 Mins Read