The feud between Infosys's Board of Directors and the company founder NR Narayana Murthy has come out in the open. Responding to Mr Murthy's letter released to media, the Board has categorically held the founder responsible for the exit of Vishal Sikka, Infosys's Managing Director (MD) and Chief Executive (CEO). In addition, the Board said it has no intention of asking Mr Murthy to play a formal role in the governance of Infosys.
The Board in a statement says, "It has come to the attention of the Board that a letter authored by Mr Murthy, the Founder of Infosys has been released to various media houses attacking the integrity of the Board and Management of the Company alleging falling corporate governance standards in the Company."
Mr Murthy, responding the statement issued by the Board, said, he was 'extremely anguished by the allegations, tone and tenor of the statements. "He says, "It is below my dignity to respond to such baseless insinuations. However, several shareholders who have read the whistleblower report have told me that it is hard to belive a report produced by a set of lawyers hired by a set of accused, giving a clean chit to the accused and the accused refusing to disclose why they got a clean chit! They say that this is not the way an impartial and objective investigation should be held. I will reply to these allegations in the right manner and in the right forum and at the appropriate time."
The Board in the statement says it takes great umbrage to the contents of the letter and places on record the following:
Mr Murthy's continuous assault, including this latest letter, is the primary reason that the CEO, Dr Vishal Sikka, has resigned despite strong Board support.
Mr Murthy's letter contains factual inaccuracies, already-disproved rumours, and statements extracted out of context from his conversations with Board members.
The Board assures its shareholders, employees, customers and communities that it is committed not to be distracted by this misguided campaign by Mr. Murthy and will continue to adhere to the highest international standards of corporate governance as it executes its strategy of profitable growth for the benefit of all Infosys stakeholders.
Mr Murthy's campaign against the Board and the Company has had the unfortunate effect to undermine the Company's efforts to transform itself.
The Board has been engaged in a dialogue with the Founder to resolve his concerns over the course of a year, trying earnestly to find feasible solutions within the boundaries of law and without compromising its independence. These dialogues have unfortunately not been successful.
The Board declines to speculate about Mr Murthy's motive for carrying out this campaign, including the latest letter. The Board believes it must set the record straight on the false and misleading charges made by Mr Murthy because his actions and demands are damaging the Company and misrepresent its commitment to good corporate governance.
According to the Board, since Sikka's appointment in August 2014, Infosys has delivered competitive financial performance through profitable revenue growth. It says, "The Company was lagging significantly behind industry in growth rates when Vishal (Sikka) took over and now we are in top quartile from a performance perspective. The revenue per employee of the Company has grown for six quarters in a row. The Company grew its $100 million plus clients to 18 this past Q1 from 12 in Q1FY15, and increased its large deal wins from about $1.9 billion in FY2015 to around $3.5 billion this past year. This has all been done while improving overall utilization (excluding trainees), to a 15-year high this past quarter, and an all-time high including trainees, while improving our cash reserves, rewarding Infoscions with a new equity plan, and returning Rs19,000 crore as dividend, including dividend distribution tax, over the last three years. This has all been done while improving standing with clients, to the highest ever in the 12 years with a jump of 22 points in CXO satisfaction."
Disputing claims from Mr Murthy over corporate governance, the Infosys Board says it has continued to maintain the highest standards of corporate governance that the Company is known for.
"The Board has sought the counsel of some of the most respected governance experts and legal advisors in the world, which have thoroughly investigated all anonymous allegations and concluded that no wrongdoing occurred. For Mr Murthy to imply - with no evidence whatsoever - that three well-respected international law firms, members of the Infosys Board and certain employees are engaged in some grand global conspiracy to conceal information is not tenable on its face. It is important to mention here that Mr Murthy was interviewed as part of the investigation by Gibson Dunn & Crutcher LLP in pursuance of the investigation in the Panaya acquisition, and was invited and welcomed to provide any information or evidence he believed would support the allegations being investigated. He did not provide any evidence since none exists. However, he has not mentioned this is his media communication against the investigation."
Taking a firm stand about investigation on allegations in Panaya deal, the Board says "...any further use of resources and time on these matters would be a distraction for the Company and would enable those wishing unfairly to attack Company personnel to continue this harmful conduct. Therefore, the Board has formally closed the investigations of the anonymous allegations so that the Company can focus on strategy, performance, and the creation of shareholder value."
According to Infosys Board, Mr Murthy has repeatedly made inappropriate demands, which were inconsistent with his stated desire for stronger governance. "Mr Murthy has demanded that the Board adopt certain changes in policy, else he will attack board members in the public, which threat was carried out when the Board did not acquiesce. He has demanded that the Board appoint specific individuals onto the Board under similar threat, without appropriate disclosure and without regard to basic determinants of appropriateness or fit of the candidate for the role as a Board member. He has demanded operational and management changes under the threat of media attacks. Notwithstanding that the remuneration package of senior management was approved overwhelmingly by shareholders, including members of the promoter group, Mr Murthy preferred his dictat to prevail with no place or tolerance for the outcomes of shareholder democracy. Mr Murthy wanted the demands to be adhered to without attribution to him," the statement says.
The Board says "...(it) has, in its fiduciary role to consider all shareholder inputs, treated each demand from Mr Murthy as a suggestion and only acted on suggestions which we believed was in the best interest of the company and declined to act on others. Over time the demands have intensified, which when declined by the Board resulted in the threats of media attacks being carried out."
"Mr Murthy may be in the process of engaging in discussions with certain key stakeholders of the Company to further his criticisms of the Board and Management," the company statement says, adding, "We are concerned that this type of campaign runs the risk of confusing investors and undermining the Company's management efforts."
Here is the statement issued by Infosys Board...
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