No-Holds-Barred Battle Between Board, Narayana Murthy As Vishal Sikka Resigns As Infosys CEO
Vishal Sikka has resigned as the chief executive officer and managing director of Infosys Ltd. The board of the country’s second-largest software services company accepted Sikka’s resignation with immediate effect, according to an exchange filing by the company.
UB Pravin Rao, chief operating officer of the company, will step in as interim CEO and managing director, the filing said. The board has appointed Sikka as the executive vice-chairman.
The succession plan for appointment of a new Managing Director and Chief Executive Officer has been operationalised by the Board and a search for the same has been commenced.”Infosys Statement
A press release issued by the company attached Sikka’s resignation letter, in which he said that while the company has achieved much over the last three years, ‘distractions’ have undermined the good work done.
“...the distractions that we have seen, the constant drumbeat of the same issues over and over again, while ignoring and undermining the good work that has been done, take the excitement and passion out of this amazing journey," Sikka wrote.
Earlier on Friday, Mint newspaper reported that co-founder Narayana Murthy had written an email to some of his advisers in which he said that at least three independent board members of Infosys believe that Sikka is more suited to being a Chief Technology Officer rather than CEO. In the past, Sikka has been criticised for issues ranging from his salary to decision on acquisitions made.
In a separate media release, the Infosys board put the blame of Sikka’s resignation squarely on Murthy’s “continuous assault” and “campaign against the board and the company. “Mr. Murthy's continuous assault, including this latest letter, is the primary reason that the CEO, Dr. Vishal Sikka, has resigned despite strong Board support,” said the statement. The board, in its statement, also tried to reassure customers and stakeholders by saying that it “is committed not to be distracted by this misguided campaign by Mr. Murthy” and will continue to execute the company’s strategy of profitable growth.
In a press conference, R Seshasayee, chairman of the board described this period as the most challenging in the company’s history.
In his own resignation letter, Sikka said that he has been besieged with increasingly personal attacks over the last few months.
Over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks. Allegations that have been repeatedly proven false and baseless by multiple, independent investigations. But despite this, the attacks continue, and worse still, amplified by the very people from whom we all expected the most steadfast support in this great transformation.Vishal Sikka In His Resignation Letter
Sikka added that this drumbeat of distractions and negativity inhibits the company’s ability to make positive change. “Hundreds of hours of my own time has gone into this recently,” Sikka wrote.
Murthy, who responded to the letter from Sikka and the board, via an emailed statement said he was “anguished by the allegations.”
I am extremely anguished by the allegations, tone and tenor of the statements. I voluntarily left the Board in 2014 and am not seeking any money, position for children or power. My concern primarily was the deteriorating standard of corporate governance, which I have repeatedly brought to the notice of the Infosys board.NR Narayana Murthy, Co-Founder, Infosys
Sikka was the first outsider to be appointed as CEO of Infosys on August 1, 2014. He took over after Murthy stepped down from his role as executive chairman. Prior to Infosys, Sikka was the global product head at Germany’s SAP AG.
Infosys, in its press release said that during Sikka’s tenure, Infosys’ revenues have grown from $2.13 billion in the first quarter of FY15 to $2.65 billion in the recently concluded first quarter of FY18. There has been an increase in liquid assets (including cash and cash equivalents) from $4.9 billion in June 2014 to $6.1 billion in June 2017. Dividends of over Rs 19,000 crore (including dividend distribution tax) has been paid over these three years, the company said.
On Friday, news of Sikka’s exit unnerved investors.
Shares of Infosys were down more than 10 percent in afternoon trade and the company lost close to Rs 20,000 crore in market capitalisation. One analyst that BloombergQuint spoke to compared the company to a ‘driverless’ car while speaking on condition of anonymity. Batlivala & Karani Securities cautioned that Infosys will find it difficult to attract external talent to replace Sikka.
In our view, bringing back Nandan Nilekeni (assuming rumors come true) will provide the stock temporary respite only but unlikely to deliver operational outperformance.Batlivala & Karani Securities
While shareholder concerns played out on the company’s stock, Infosys clients will undoubtedly be watching developments equally closely. “I will advise my clients to watch out for Infosys and mitigate every critical engagement with the company,” said Sudin Apte, principal analyst and chief executive officer of Offshore Insights, an independent advisory and research firm.
Signing off, Sikka said his resignation should give everyone a chance to reflect.
I hope that it gives everyone a chance to reflect, and give the transformation effort another big push and move the company forward rapidly to build its future, to build upon the foundation that we have laid over these past 3 years. If these types of attacks continue, I hope each of you will continue to be the voice of fairness and reason - providing the active, emphatic and unequivocal support that the company, the management, the employees, and all of the stakeholders and friends of the company need in order to succeed.Vishal Sikka In His Resignation Letter