JPMorgan suggests more de-centralisation for Infosys as stock falls 2%
Says the exit of Sandeep Dadlani is worrying sign; suggests against centralizing all responsibilities at the top level.
Infosys was under selling pressure on Monday after a leading brokerage highlighted the leadership issues at the company and the over-centralisation with its top management.
JPMorgan, in a note to clients, highlighted that Infosys had announced that its President Sandeep Dadlani had stepped down from the company. He was the head, retail, CPG and logistics, manufacturing, US and chairman — EdgeVerve.
“Our conversations and channel checks both within Infosys and outside indicate that he is well regarded and his contributions seen as significant to Infosys over the years. That a well-paid executive with such a high profile has called time on his career in Infosys is both surprising and worrying to us,” the research firm wrote in its note.
Further, it added that it had assumed stability at the firm given that Vishal Sikka was at the helm for nearly three years now. Senior management exits after a CEO has taken over may not be unusual, it said, adding that to see valued executives leave three years into a CEO’s tenure appear worrying unless the departing executives get a worthwhile career boost such as a CEO responsibility.
The potential risk, JPMorgan said, was due to over-centralization of responsibility at the top.
“In large firms, vesting P&L responsibility of multiple units in the hands of a few senior executives or them handling heterogeneous KRAs can lead to sub-optimal performance of some units besides elevating the key man risk,” the report added. The departure of a key executive requires refilling at multiple levels or roles, it added. “We would suggest Infosys has to get more de-centralized,” the report added.At 15:28 hrs Infosys was quoting at Rs 929.90, down Rs 10.60, or 1.13 percent on the BSE. It touched an intraday high of Rs 940.45 and an intraday low of Rs 928.00.