Vishal Sikka’s exit revives promoter vs outsider debate for top mgmt job

New Delhi : The promoter-versus-outsider debate has returned to the fore on running a blue-chip enterprise in India with experts blaming differences between the top management and some founders for Vishal Sikka quitting as Infosys CEO. Sikka took charge as Infosys’ first non-founder CEO in 2014, prior to which the top post at the company was held by one or other founders of the country’s second largest IT firm. The company Friday announced a surprise resignation by 50 -year-old Sikka, who cited “a continuous stream of distractions and disruptions” for his decision, while the Infosys board was direct in blaming “continuous assault” and “campaign” by founder and ex-chairman NR Narayana Murthy.

This is the second high profile exit of an ‘outsider’ from the top post of a big enterprise in India, after Cyrus Mistry was removed as the head of the over $100 billion Tata group. While Mistry’s family has a significant stake in Tata Sons, the group’s holding company, he was still seen as a non-Tata. The main reason cited for his exit by several experts was differences with Ratan Tata.Tata group has appointed N Chandrasekaran, again a non- Tata but a long-timer at the group firm TCS, as its new chief.

A large number of Indian blue-chips are run by promoter family members and include Bajaj, Hero Group, Bharti, Mahindras, Dr Reddy’s, Lupin and Sun Pharma. While several of these appoint professional outsiders as CEOs and for other top positions, the top-most executive positions (including as Executive Chairperson) are held by the promoters. At the same time, there are also large groups like ICICI, HDFC, ITC, L&T and Axis Bank where the top-management positions are held by non-promoters and for several years together without any disruptions in several of such cases. At several family-run companies, children are seen to be groomed as successors and some of the examples include both the Reliance groups, Wipro, Godrej Cipla and Adani.

While 70-year-old Narayana Murthy’s son Rohan Murthy was also associated with Infosys for a while, the IT czar asserted Friday he is not seeking “any money, position for children, or power” and his concern primarily was the “deteriorating standard” of corporate governance at Infosys. Still, several experts and industry leaders opined it was the differences between the promoters and the top management that led to Sikka’s exit. Entrepreneur and Rajya Sabha member Rajeev Chandrasekhar tweeted that it is a low point in the history of Infosys and it is “inconceivable” that a professional CEO appointed by the board and shareholders will be “hounded out”.

Unprecedented twist

  • Infosys CEO resigned citing a continuous stream of distractions and disruptions from founders
  • This is the second high profile exit of an ‘outsider’ from the top post of a big enterprise in India, after Cyrus Mistry was removed as the head of the over $100 billion Tata group
  • However, large groups like ICICI, HDFC, ITC, L&T and Axis Bank, where the top-management positions are held by non-promoters, are running without any disruptions

Infy not keen on giving Murthy “formal role”

Even as Infosys Ltd saw Vishal Sikka step down from the post of managing director and chief executive officer Friday, the company doesn’t intend to invite founder Narayana Murthy to play a formal role in governance. “Given the commitment of the board to remain independent and pursue the strategy that we have chosen, at this point the board has no intention of inviting Mr. Murthy to play a formal role in the governance of the company,” Co-Chairman Ravi Venkatesan said during an investor call. Over the last few months, Murthy has questioned the board and Sikka’s ability to resolve governance issues at the company. “We believe we have done everything we could do,” said Venkatesan.

Infosys’ stocks fall steepest in over 4 years

Scrips of global software major Infosys on Friday plummeted almost 10 per cent, losing around Rs 29,000 crore in terms of market capital, post the resignation of Vishal Sikka as its Chief Executive Officer (CEO) and Managing Director (MD). In the process, it pulled down two key market indices by almost one per cent. According to market observers, the fall in the scrip price of the company is the biggest since January, 2013. Stocks of the IT major plunged 9.52 per cent on the BSE and traded at Rs 923.90 per share, down Rs 102.15 from its previous session’s close at Rs 1,021.15 per share. “Post quitting news of Vishal Sikka, the stocks of the company plummeted. Infosys has lost almost Rs 29,000 crore in market cap, post the news,” Dhruv Desai, Director and Chief Operating Officer of Tradebulls said.

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