If the Infy board can’t manage Murthy, the 3.44% man, there’s big trouble ahead

N. R. Narayana Murthy, founder and chairman of Infosys, listens to a question during an interview with Reuters at the company's office in Bangalore February 28, 2012. Picture taken on February 28, 2012. REUTERS/Vivek Prakash (REUTERS - Tags: BUSINESS SCIENCE TECHNOLOGY PROFILE HEADSHOT) - RTR30CV2

Hours after Vishal Sikka’s resignation as the CEO of Infosys was announced the board of directors publicly criticised the company’s founder N R Narayana Murthy, an unprecedented action. The board squarely blamed Murthy for carrying out what amounted to a campaign of calumny against Sikka and hounding him out of Infosys. The expression of outrage, and the surprise burst of courage, while welcome, could be too little too late.

For more than a year the company has tried to appease Murthy as he levelled a series of attacks on Sikka, a former technology chief at SAP who was appointed in 2014. Anything could rile Murthy, from Sikka’s “excessive compensation” to allegations of failure in corporate governance. While legitimate questions deserve answers, what was very clear was that Murthy was pursuing an agenda which Sikka has now described as a “drumbeat of criticisms.” By indulging Murthy — no doubt with the best of intentions — the board made a grave error.

That Murthy wielded outsized influence in the affairs of Infosys was obvious. The shareholding of the Murthy family in Infosys totalled just 3.44 percent at the end of June, so on that count he was a lightweight. In any company other than Infosys he would have been outvoted and laughed out of the place but the board respected his standing as a founder and his moral authority. Even his moral authority was suspect after he returned to the company post retirement with his son in tow despite lofty preachings against nepotism. So why was he still being humoured?

The proximate cause of Murthy’s latest attacks on Sikka concern allegations of corporate misgovernance which have been investigated and found to be untrue. But Murthy refuses to believe the findings of professional outfits and insists that chapter and verse of all the reports be made public. This is an unreasonable and irresponsible demand, and amounts to a fishing expedition. His suggestion of a coverup imputes disreputable motives to honourable people and is unworthy of the man. The campaign to publicise the contents of the inquiry reports is just the latest tantrum. The reason he has gone on doing this is because no one told him where he got off. If Murthy actually has evidence of wrong-doing he should publicise it now.

Infosys is one of India’s rare corporate institutions; it is not just another company. One of the reasons that it is different is because of its diffused ownership. In India, promoters normally own significant chunks of shareholding and thus keep a tight grip on the company, but that is not the case with Infosys. It was assumed that Murthy has infused it with a middle class ethos, and that it would be a shining example of enlightened capitalism. Ironically, Murthy is now looking like a strongman. So while it is true that he played a major part in building Infosys as an institution, he has been feted enough for the accomplishment and earned much respect. But that cheque has already been cashed and Murthy is in overdraft.

It may be idle to now speculate about whether or not Sikka would have resigned had the board been as vociferous in its condemnation of Murthy as it was today. But it does offer salutary lessons in standing up to bullies. While Murthy is not in the league of US President Donald Trump, the comparison cannot be escaped. Trump has tried to draw moral equivalence between neo-Nazis and those opposing them, earning much opprobrium. Most Republican leaders, while happy to criticise neo-Nazis, are not coming out against Trump for his implicit defence of neo-Nazis. This is much like the Infosys board being happy to defend Sikka but not attack Murthy. The damage has been done.

So what now? The board has the arduous task of finding a top-notch CEO who must be convinced that he will be defended successfully against potentially deadly attacks by Murthy. Having found the pluck, even though belatedly, to deal with Murthy head on, perhaps the board can persuade Sikka to stay? It is no shame for him to climb down, and his stature will only be enhanced.

Whatever happens, investors must also take a firm stand. With shareholding the way it is, it is their responsibility to be proactive and more vocal on the issues that matter. Likewise with the founder-promoters, who have all maintained a studious silence. If they believe that Murthy is wrong, they must say so. It is their company too, not just Murthy’s.

If Sikka sticks to his stand on resigning, which competent person will want to take the risk that he has? If the board cannot manage the 3.44 percent man, Infosys is in deep trouble.