All-out war at Infosys leads to resignation of Vishal Sikka, board blames Murthy, stocks plunge by 10 per centInterestingly, the Infosys board blamed founder NR Narayana Murthy for Sikka’s resignation and the open spat led to company stocks plummeting nearly 10 per cent, with its market valuation falling by over Rs 22,518 crore.
In a dramatic development, high-profile technocrat Vishal Sikka, the first non-founder CEO of Infosys, on Friday resigned as CEO and Managing Director of the global software major following months of acrimony with high-profile founders, led by NR Narayana Murthy, citing "malicious" and "personal attacks" on him.
Interestingly, the Infosys board blamed founder NR Narayana Murthy for Sikka’s resignation and the open spat led to company stocks plummeting nearly 10 per cent, with its market valuation falling by over Rs 22,518 crore.
While Sikka did not name Murthy for his exit, the board of the USD 10 billion firm blamed him for “continuous assault” through “factually inaccurate” and “already-disproved rumours” for the sudden resignation “despite strong Board support”.
Murthy, who left all board positions at Infosys before Sikka began his five-year term in August 2014, launched a counter-offensive saying that all he wanted as a shareholder was good governance and had neither questioned Sikka’s work nor sought money or position for his children.
Sikka, 50, a former German IT major SAP executive under whose three-year tenure Infosys’ revenue rose by about 25 per cent, said he faced “false, baseless, malicious and increasingly personal attacks”.
Infosys board in an unusually strong statement defended Sikka’s performance and ruled out a formal role for Murthy in the company’s governance.
In February last year, Sikka’s term was mid-way extended by two more years till 2021 largely because of his performance.
In marathon investor calls and media briefing, Infosys Chairman R Seshasayee said anonymous complaints of alleged misdeeds in acquisition of Israeli firm Panaya are being repeated over and over again despite two independent probes not finding any wrongdoings.
He countered Murthy’s assertion that the “whistle-blower complaint” was probed by a set of lawyers hired by a set of accused and such a report gave clean chit to the accused.
Seshasayee said that to give shareholders task of taking up anonymous complaints and engaging a panel for probe is the “best way to destroy an organisation”.
He said the theory that globally renowned independent auditors and forensic experts hired for the probe can be compromised is totally untenable.
He attributed non-release of the full probe report to confidentiality clauses.
Murthy first released a short statement expressing “extreme anguish” over the “allegations, tone and tenor” of the Infosys Board statement.
He then went on to release a 9-page letter he had written to the company advisors on August 14 where he raised issues of “plummeting” corporate governance since September 2015.
The last straw for Sikka seemed to be Murthy’s claim that he had been told by Infosys’ independent directors that Sikka was more suited as a Chief Technology Officer than CEO.
Sikka’s exit just a day ahead of the Board mulling up to Rs 13,000 crore buyback offer sent company stocks plummeting nearly 10 per cent, with its market valuation falling by over Rs 22,518 crore.
“My concern primarily was the deteriorating standard of corporate governance which I have repeatedly brought to the notice of the Infosys board,” Murthy said, adding that it was below his dignity to respond to “baseless insinuations.”
He promised to reply to the allegations in the right manner and in the right forum and at the appropriate time. Sikka said he does not agree with the suggestion that the Infosys board let him down. “They have done a phenomenal job.”
As the stocks went into a free fall, co-chairman Ravi Venkatesan and Seshasayee sought to assuage investor concerns. Venkatesan said the board was committed to the strategic direction set by Sikka, while Seshasayee said there will be no change in the company’s share buyback plan.
Venkatesan also disagreed with Murthy’s comment on Sikka being better suited as CTO than as a CEO saying the world knows it that he is a phenomenal tech guy and now “has blossomed as a leader.”
The resignation follows a year-long public spat where the founders have raised a slew of concerns, right from Sikka’s pay package to raising doubts over the company’s USD 200-million Panaya acquisition.
Founders still hold 12.75 per cent in Infosys. While Pravin Rao, currently chief operating officer, has been named interim CEO, Sikka will become executive vice- chairman and will be paid USD 1 in annual salary. Sikka will help the company search a new MD and CEO and the deadline has been set for March 31, 2018. As the charges flew thick and fast, Infosys Board claimed that a letter authored by Murthy “has been released to various media houses attacking the integrity of Board and management”.
“Mr Murthy’s letter contains factual inaccuracies, already-disproved rumours, and statements extracted out of context from his conversations with Board members,” it said. The Board said Murthy repeatedly made “inappropriate” demands inconsistent with his stated desire for stronger governance, and his “campaign” intensified over time.
Without naming anyone, Sikka in his resignation letter to the Board said that “over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks”.
These allegations, he said, have been repeatedly proven false 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.”
Once the poster boy of Indian IT success story and considered a bellwether among Indian tech stocks, Infosys has had to battle challenges like an uncertain business environment, senior level exits and increased visa scrutiny in key markets like the US and the UK.
Troubles only mounted for Infosys when an anonymous letter was sent to the market regulators in February this year, alleging that Panaya acquisition was overvalued and that some Infosys executives may have benefited from the deal. While an independent probe absolved the board of any wrong doing, Murthy kept the pressure on by demanding that the company goes public with the full contents of the investigation report. Infosys has so far refused to make public the probe report.
“Over time the demands have intensified, which when declined by the Board resulted in the threats of media attacks being carried out,” said the statement issued by the Board. During an investor call, Sikka said the “continued drumbeat” about former CFO Rajiv Bansal’s severance package and the Panaya deal in the last 4-5 quarters have been “sickening”.
He followed it up with an emotional letter to Infosys employees and said this “noise” has consumed hundreds of hours of his time in recent times and therefore, he came to the decision to quit.