By S P Tulsian
CEO & Editorwww.sptulsian.com
“Oh my God!”
That was the reaction right across corporates and investor corridors when the news broke that Vishal Sikka, CEO and MD of Infosys had resigned. Like the Mistry ouster, this was one board room drama which became kahani ghar ghar ki!
Sikka’s resignation has unleashed a storm in a tea cup. Big questions on issues of corporate governance have been raised by a promoter. Questions on the independence of the Board have also been raised — where it was collectively working on pacifying the promoter for the last 18 months or so, though the promoter was being so unreasonable in his demands, with incorrect facts. All this can be gleaned from the letter written by the management.
An Infosys statement released dated August 18, 2017, issued to stock exchanges have made a few startling revelations, few of them being:-
Mr. Murthy's continuous assault, including his latest letter, is the primary reason that the CEO, Dr. Vishal Sikka, has resigned despite strong Board support.
Mr. Murthy's letter contains factual inaccuracies, already-disproved rumours and statements extracted out of context from his conversations with Board members.
Mr. Murthy has demanded that the Board adopt certain changes in policy, else he will attack board members in the public; this threat was carried out when the Board did not acquiesce.
Mr. Murthy has demanded that the Board should appoint specific individuals onto the Board under similar threat, without appropriate disclosure and without regard to basic determinants of appropriateness or fit of the candidate for the role as a Board member;
Mr Murthy has demanded operational and management changes under the threat of media attacks,
Mr.Murthy wanted the demands to be adhered to without attribution to him.
In response to all these, the Infosys Board has said:
The Board has, in its fiduciary role to consider all shareholder inputs, treated each demands from Mr. Murthy as a suggestion and only acted on suggestions which we believed was in the best interest of the company and declined to act on others. Over time the demands have intensified, which when declined by the Board resulted in the threats of media attacks being carried out.
The company has now brought these out in the open and put it on record, which indicates dominance of minority ex-promoter, over a Board of 10 members, of which, 8 are non-executive independent directors. Strangely now, Infosys has Non-executive Chaiman, Co-Chairman, Executive Vice-Chairman and Interim MD & CEO and COO. Why so many power centres – all to please and pacify promoter?
But does an eminent independent Board, of a company like Infosys, need to take care of 12.75% stakeholders only, being the holding of five promoters? What about the interests of 87.25% stakeholders, of which, about 75% is held by DIIs, FIIs & Depository Receipt holders?
It is seen that many Indian promoters try to ape foreign system of professional management, with professional board, but seen repenting, once they give up the control of the company. It is ideal to give up executive role and Board seat after certain age, but difficult to keep calm thereafter. So, what is the compulsion of this idealism? Infosys founder Narayana Murthy having given up his executive role, as also, vacating Board seat at Infosys, has admitted of regret of having given it up, despite being advised otherwise by his well-wishers then.
Indian industrialists are seen hard working, ambitious, possessive and those believing in dynasty way of managing business. This rule of dynasty has worked very well till this date and there is no harm seen either.
Old stalwarts like late G D Birla worked till his age of 89 years. JRD Tata worked till 89 years, two years after he relinquished Tata Sons chairmanship in favour of Ratan Tata. KK Birla, elder son of GD Birla worked till 90 years, while his younger brother BK Birla still at 96 years is chairman of Century Textiles, Century Enka and Kesoram.
At 79, Rahul Bajaj is Chairman of Bajaj Auto, Bajaj Finance and Bajaj Finserve. Late Brijmohan Lall Munjal was Chairman Emeritus of Hero MotoCorp, till he was 92 years. TCS Founder FC Kohli who’s referred to as father of Indian software industry, is an Independent Director in Triveni Engineering, at 93 years.
At 83, RC Bhargava is Chairman of Maruti Suzuki. Similarly, Azim Premji is Chairman and Managing Director at 72.
In fact, this trend is seen across the country, with practice being followed in all the groups, communities, sectors and states. It is wrong to believe that only professionally-managed companies are doing well, while family run companies can't do well.
Reliance Industries (RIL), having distinction of highest market capitalisation of over Rs 5.12 lakh crore, on Indian bourses, has Mukesh Ambani as its CMD, who is holding this position by virtue of his academic and managerial capability. He is a promoter as well.
India Inc feels that it will be good for Infosys if its promoter Nandan Nilekani comes back as Chairman, whether in an executive or in non-executive role. This belies the myth of professional management as the only way to success which was seen having adopted by the promoters of Infosys three years back when one of its founder promoters Shibulal did not perform well.
So now, majority of the companies are seen having a mix of promoter and professional managers. Case in point being AV Birla Group, Kotak Bank, M&M, JSW, RPG- Harsh Goenka, RPG-Sanjeev Goenka, Marico, Dabur, TVS, Yes Bank, Eicher, Bajaj, Bharti, Asian Paints and many pharma companies.
A few large companies like ITC, HDFC, ICICI Bank, L&T, IDFC etc. have been professionally managed. As there are no identifiable promoter existing with these companies, professional management is a compulsion than a choice. In case of few of such companies, the CEO & MD is seen existing for decades, giving impression of them being promoters or having no courage or willingness to part with the control.
So, the entire fight of Infosys is seen more of ego, control, position and power, while similar kind of things were seen in Tata Group as well some time ago. Thirst for power has seen split in the groups as well, either due to family getting bigger or ego between the siblings. The Birlas, Mafatlals, JK, RPG, Ambanis, Bajajs and Jindals are few such examples.
It seems that India Inc will take a big lesson from the Infosys episode and will re-think hundred a times before taking a decision to part with management and control, handing over the reins to make it a purely professionally-run company.
When in Rome, do as the Romans do.
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