Infosys row: Sikka out but Murthy & Co may want a complete clean-up

Those who thought Vishal Sikka's resignation will bring an end to the woes of the Infosys management, were clearly mistaken.

In his resignation letter as well as the conference call addressed to the investors and stakeholders, Sikka and other senior board members tried to defend themselves by painting a rosy picture of the company' finances and future outlook.

During the call, Ravi Venkatesan, Co-Chairman of the Infosys Board of Directors, lashed out at co-founder Narayana Murthy, saying “The constant unsubstantiated allegations caused substantial damage to the morale and culminated in the departure of Sikka”. The conference call was held immediately after the CEO's resignation.

A majority of the experts and analysts were also seen backing Sikka in the name of defending the interests of the company's shareholders.

But this is unlikely to settle the matter or make the brigade of retired founding members step back from their criticism of the “dubious” corporate governance in the company.

It is clear from the statement of former Infosys board member and CFO V Balakrishnan that the battle has just begun. By demanding the resignation of four of the company's current board members, including chairman R Seshasayee, co-chairman Ravi Venkatesan, head of audit committee Roopa Kudva, and head of the nomination and remuneration committee Jeffrey Lehman, the former CFO has indicated that it's not over, till it's over.

The current management cannot answer the questions raised by Murthy on corporate governance issues by paying a dole-out to investors in the form of a share buyback offer of Rs 13,000 crore at Rs 1,150 per share- around 30% premium on the market price, according to moneycontrol.com

Murthy and his former colleagues, who have built the company from scratch over a period of two decades, are determined to set right the corporate governance issues in the company. 

During their tenure, the company was considered well ahead of the times in terms of following corporate governance rules. But as the new crop of managers took over, the rule book of corporate governance was considered outdated and an impediment to the growth of the company. However, the truth remains that there wasn’t much to write home about in terms of growth especially when compared to the golden period of India’s second largest software company. It was this golden period that made Infosys one of the drivers of India’s software revolution. 

To an extent, Murthy’s critics might be right in considering him to be somewhat like an old patriarch who is unable to let go of his habit of controlling the empire he built. But it is also true that it must be impossible for Murthy to remain quiet while seeing the institution nurtured by you go down in terms of values and ethics.

It is impossible to justify management's decision of approving a high severance package to former chief financial officer Rajiv Bansal - 24 months’ salary (Rs 17.38 crore) - as compared to three months’ salary for others.

Similarly the allegations of Sikka requesting for improper deals with customers and receiving 'inappropriate compensation' also need a closure through discussions. The management needs to sit with the disgruntled founders of India's second largest software company and agree for a set of rules that the former will abide by in future to keep its record of corporate governance unblemished. And there should not be any misgivings about the intention of the founders in this case.

They are unlikely to back down on the argument that the ongoing tiff between the old and the new guard is harming the company. The rules of corporate governance are different from the rules of double-entry accounting. Floundering in the former cannot be compensated by flourishing in the latter.