Infosys Founder Clashes With Board Again in Midst of CEO Hunt

(Bloomberg) -- Infosys Ltd. co-founder Narayana Murthy publicly criticized the company’s board again, just as directors try to recruit a chief executive officer to replace one who resigned out of frustration with such clashes.

Murthy said the board has still not addressed questions he raised in August about poor governance and excessive severance, according to a statement he released. CEO Vishal Sikka said that month he would step aside amid the distractions of escalating criticism from the co-founders over strategy and compensation.

The clash risks undermining board efforts to recruit a top-notch leader to take the helm of the technology services giant. Infosys on Tuesday slashed its annual revenue forecast as it faces tumult within the industry it helped pioneer.

“We are concerned this continued meddling even after the management/board refresh will do collateral damage to Infosys’ image in the on-going CEO search,” Sudheer Guntupalli, an analyst with Ambit Capital Pvt., wrote in a research note. “The situation is back to square one with [Murthy] repeatedly questioning/undermining decisions of the board.”

Infosys founders had questioned Sikka’s compensation, which total 487 million rupees ($7.5 million) in base salary, bonus and benefits in fiscal 2016. They also criticized severance payments to other executives.

"I stand by every question on poor governance raised in my speech to Infosys investors dated August 29, 2017,” Murthy wrote. “The fact remains that none of these questions have been answered by the Infosys board with the transparency it deserves. I am disappointed.”

Infosys is trying to get its business back on track. The software exporter is now forecasting 6.5 percent to 7.5 percent growth in revenue in the year ending March in U.S. dollar terms, versus the 7.6 percent rise analysts were anticipating.

Co-founder Nandan Nilekani returned to chair the company in August when Sikka stepped down, blaming public clashes between the board and co-founders led by Murthy that made his job untenable. Sikka -- who’d presided over 25 percent sales growth since joining from SAP SE in 2014 -- leaves the company rudderless as rising competition and automation curtail growth in technology services. 

Infosys remains on the lookout for a replacement. Nilekani has said he’s focused on finding a new leader, reconstituting a depleted board and stabilizing operations. It’s reviewing a pool of candidates in hopes of making a final decision within weeks, the chairman said in late August.

“The next few quarters will be extremely critical for the company and will require delicate handling to say the least,” said Sanchit Vir Gogia, the New Delhi-based chief analyst of consultancy Greyhound Knowledge Group. “The new management has to go out of their way and keep focus on what matters: client outcomes, employee happiness and investor returns.”

To contact the reporters on this story: Saritha Rai in Bangalore at srai33@bloomberg.net, Anand Basu in Mumbai at abasu31@bloomberg.net.

To contact the editors responsible for this story: Peter Elstrom at pelstrom@bloomberg.net, Edwin Chan

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