The tussle between the board of Infosys Ltd. and co-founder Narayana Murthy should not have been allowed to ‘blow up in the media’ but the fault certainly doesn’t lie with the founders alone, said Mohandas Pai, former chief financial officer of the company.
“It takes two to tango,” Pai said when asked about the leaked emails and public spat between the Murthy and the board. He defended the company’s founders, saying they had a right to ask questions but the Infosys board refused to respond on a number of occasions.
Here are edited excerpts from the conversation:
How would you react to the news coming in?
I am surprised. The honeymoon period is over. There was disquiet in the company that he was looking out for himself and a few other people in the company. Other people were not being looked after and there were many other issues that went wrong. The fact that many from the team that he heads quit, the Panaya acquisition was going sore, the corporate governance issues. And it is not working. He was not spending enough time in India with the company. He maintained a distance between himself and the rest. So, there was a mismatch of expectations. I thought it may happen after a year but I am surprised that it happened so quickly.
What would be the rationale of the board to keep him as vice-chairman. If you find his record has been tainted in any fashion, you would not want him in any senior leadership position in the company?
You must also know that the board has signed a golden parachute with him. The board made a big mistake in signing that agreement. The employment agreement filed with the SEC was not approved by the shareholders. I don’t recall that it has been approved by the shareholders. It is only disclosed in the SEC filing. It’s again a governance issue and a failure of the board. Now it has to find a quick solution. They have to keep in the company to look at the severance.
Do you think that the board has done a good job in the way things have transpired?
The experiment of Murthy and the founders has failed. Ravi Venkatesan, the co-chairman said in an interview that it was too fast, too sudden, there was no continuity, there was clash of culture. It’s a very strong company with a very strong culture and value system. They got an outsider which was possibly what Murthy said was right. He’s possibly not CEO material because he didn’t behave like a CEO. Now it’s time for them to sit down together and work out a very simple structure. I am only talking about the severance pay because I am very surprised that he is being bumped up to vice chairman. You can’t have a company with a chairman, co-chairman, executive vice chairman and interim CEO. It’s bizarre. The only logical reason is that there is a golden parachute and the board did not have the courage to take a decision, so they took an easy way out. But it’s a company which requires deep reform and a restructuring of the board urgently to restore confidence.
The IT sector is in a state of flux. It is just completely bad timing for one of the largest software exporters to have nobody or a vacant position out there. There is an interim position being filled in by UB Pravin Rao. How do you think investors react to such a scenario?
All the bad news has been factored in. The stock has gone nowhere for three years. All the governance issues have been discounted by the market. I don’t know how the market will look at it. I will be positive and say that the company should make a clean break, restructure the board, come forward and run it. The business is going reasonably well. The company has gotten over various issues. Look at how the company has done in the last two quarters. The business is turning towards the large players. Cognizant and TCS are saying the same thing. That’s okay. But the key issue is governance. If governance is worked out, the company could be stable.
Where does the blame for this chaos lie? You don’t think that co-founders especially Mr Murthy had an active role in creating a chaos around the company?
Murthy and his colleagues are major shareholders. They have a right to be heard. The company has been responding. In any circumstances, in any part of the world, if the major shareholders raise that concern, the board will come and talk about it and resolve it.
Would this not have been a better-done process if it was done in a more structured fashion as supposed to leaked letters and leaked emails?
The leaked emails have been going on for three years. The matter started going up after they have a huge payment to Rajiv Bansal. Murthy raised the issue long back. The board didn’t answer properly and the issue went on and on and the board tried to hide. So don’t blame anybody now.
The point is the board has not responded to shareholders. They have not done their job. And it’s blown up in the media. I agree this is no way to tackle issues. They could have discussed but it required the board to respond and the board has not been responding. In the Panaya matter after the investigation, the report has not made public.
Vishal Sikka was appointed with consensus from Mr Murthy. If Mr Murthy thought he was not doing the right things and the board ought to have curbed him, then Mr Murthy should have taken action to reconstitute the entire board. Why could this not be done in a more structured fashion and why has it played ought in the ugly fashion it has?
It takes two to tango. It cannot be one partner. Murthy has been raising the issues, the board has not been responding and they appointed a lawyer to talk to shareholders. This is not done. What will the shareholders do? They wrote a letter. I don’t know who leaked the letter. But whatever happened should not have happened in this manner. It should have happened in a structured manner.