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Institutional EYE

Commentary on Corporate Governance Issues

Infosys: Fighting the wrong battle

The appointment of Ravi Venkatesan as Co-Chairman may be construed as signs of Infosys’ board listening to feedback. But, in doing so, it has courted another controversy. IiAS believes that Infosys is now fighting the wrong battle: instead of focussing on its performance, it is now spending more time focussing internally and quelling perceptions.

Ravi Ventakesan’s appointment as Co-Chairman has spurred yet another controversy for Infosys. With increasing criticism from Narayan Murthy on Seshayee’s ability to lead the board, Infosys’ board seems to have caved in and added another layer of leadership at the board level. While this may have been done to appease Narayan Murthy, IiAS believes this decision was unnecessary. Co-Chairmen positions are rarely seen in corporate India and having more than one person leading the board is more likely to create factions.

The appointment of a Co-Chairman also changes the power balance at the board. While it may not undermine Vishal Sikka’s position – it will, in effect, add a layer of complexity to his influencing ability. Functioning could be eased if the Board clearly articulates the roles and responsibilities of the Co-Chairs.

The decision to change its dividend policy and return Rs.130 bn (about USD 2 bn) to shareholders (in dividends or buybacks) in the current year is well-placed. One may debate whether this has been done to appease investors, or is a re-ordering of the company’s capital allocation strategy. But it comes after much goading, and is too little too late.

Infosys’ transparency and disclosure levels for long have been better than most – but current lapses in disclosures relating to Vishal Sikka’s remuneration and his contract have given detractors a reason for outcry. While there is no denying that Infosys’ transparency levels can improve from their current levels, IiAS believes Infosys’ board needs to be far more externally focussed. Infosys needs to re-energize its business model to embrace newer (SMAC1) technologies, improve profitability, and address an increasingly uncertainty in the external environment.

Infosys’ board is focussing on the wrong problem – it is fighting for credibility against Narayan Murthy’s stature, rather than fighting the more immediate market-driven battles. And it is these market-driven challenges that should drive its internal restructurings, and capital allocation decisions. Discarding the romanticism of its past will enable Infosys to fully embrace the


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