Will Infosys be able to resolve Murthy-Sikka spat before it's too late?

Bad governance by the present team - is the charge laid by founder-director Narayana Murthy in the ongoing Infosys conflict.

No, everything is according to industry norms, is the pat defence by CEO Vishal Sikka.

Even as a press conference by Sikka in Mumbai on Monday evening is under way to clear the air, let us take a look at what makes up the dispute at the IT bellwether.

At the heart of the trouble lies some “core violation” of values established by Infosys’ promoters.

It all started with an acquisition costing $200 million. In February 2015, the acquisition of an Israeli software company called Panaya was made amid a series of internal debates.

The acquisition gave rise to a series of questions on governance, with then CFO Rajiv Bansal questioning the financial transaction, before finally resigning from the company.

The large sum of Rs 23.02 crore plus other benefits paid to Bansal, disclosed only last year, and Sikka’s revised $11 million compensation, a 55 per cent increase in the same year, were said to have tilted the balance of power.

Some promoters were also upset with the appointment of some directors with a political background. At the root of all this lies the promoters' allegation that the set-up suffers from inability to enforce well-established governance norms kept in place by them.

Asked further about this confusion, it was said that the end purpose is to align all three power blocks, the promoters, Board and management - which is not an insurmountable goal. "This is not like the Tata case," said Shriram Subramanyam, MD, from Shareholder advisory, Ingovern.

He also said the company needs to be more transparent about its decision to let go of its chief compliance officer in December 2016 and its severance policies.

It is important to note that Infosys has been making changes to its disclosure policies and trading policy and has bulked up its corporate governance handbook.

Were all these changes not brought to the notice of the founder director and promoters? If so, why is Murthy terming the huge severance pay off to Bansal as “hush money” and calling for an overhaul of the Board?

Murthy mounted a frontal attack on Sikka, chairman R Seshasayee and independent director Jeffrey Lehman, bringing to a head tensions between the most important shareholders at India’s larger software company.

Murthy has also sought for appointment of people like NYU's professor Marti Subrahmanyam as co-chairman, the replacement of Lehman as head of an important Board committee and the appointment of unnamed former Infosys employee “schooled” in the company’s values on the Board of Directors.

It is important to know that Murthy left the company voluntarily in October 2014 to make Infosys the best governed company in India.

He illustrates his doubts with examples; to cite one, paying huge severance pay (with 100 per cent variables) to some departing employees while giving only 80 per cent variable pay to employees in the company. The company is using such payments as hush money to hide something, is his persistent question, which has not met with an answer yet.

Let's site another example. At companies with good governance in developed countries, the rate of the CEO's salary to the next lower level is generally 1:2. At Infosys, today, it is about 2,000 between the CEO's salary and the entry-level salary for a software engineer. Look at the glaring disparity. Will it help the company to grow healthily in the future? What kind of pay fixation and compensation committee Infosys has in place now? Murthy asks.

He adds that even if these pay-offs are no misdeeds (I hope so), to call them as “generosity” points to utter arrogance towards honest employees, a total lack of responsibility and an unbelievable lack of application of mind.

Asked about the corrective course, he said that conducting a forensic audit one year after the event is laughable, since everybody knows that any trace of misdeeds can be erased by that time.

On the other side, Sikka is telling Infosys staff to ignore speculations about governance and focus on execution - he says there is no second guessing "of our deep commitment, passion and dedication to transforming this great company, even in the unprecedented new context that we find ourselves in now. We are doing this. We will do this. Together!"

But the question that Sikka will have to answer along with his present Board of Directors is that how unilateral execution of certain great plans without consensus and approval will ensure smooth sailing.

The weathercock is showing change of winds. The CEO should steer the Infosys flagship to safety instead of steering it aground in a perilous storm of controversy.

Finally, the way out, according to Murthy, is that the chair of the remuneration and nominations committee and the chair of the Board have to accept their mistakes and show contribution and willingness to see the point of the shareholders.

A good company’s culture is to seek respect from every stakeholder in everything it does. Such a company will strive to ensure that honesty, fairness, transparency, accountability, compassion for less fortunate colleagues, leadership by example and excellence should be on the front burner. He adds that management consultant Peter Drucker told him once in the nineties that a good company eats culture for lunch.

But there is only trouble simmering in the back burner at the moment, even as co-director Kiran Majumdar-Shaw is trying to hold an olive branch to Murthy to resolve the issue peacefully.

Let us hope it all gets over soon, unlike the Tata-Mistry spat which has already reached the National Company Law Tribunal.

Also read: How Infosys got bitten by the Tata bug