Employees walk along a corridor in the Infosys campus in the southern Indian city of Bangalore September 23, 2014. Infosys Ltd’s new CEO Vishal Sikka has come up with a novel approach to reviving the financial fortunes of India’s trailblazing outsourcing firm: use Facebook at work, tweet, but get the job done. Infosys has long been run as a conservative company known for keeping strict tabs on work hours and sometimes fining employees for not wearing ties on specific days. Such cheerless self-regard could not have come at a more challenging time, analysts say. To retain talent, Sikka hopes to create a more employee-friendly workplace. To match story INFOSYS-CEO/STRATEGY REUTERS/Abhishek Chinnappa (INDIA – Tags: BUSINESS SCIENCE TECHNOLOGY EMPLOYMENT) – RTR47FJ7 Photo Credit: Reuters

Trouble at the helm: Is Infosys headed the Tata Sons way?

10 February, 2017

In October last year, India Inc was in for a shock when the board of Tata Sons, the holding company of the $100-billion Tata group, suddenly sacked its chief Cyrus Mistry, ostensibly over issues of corporate governance and mismanagement. 

While the embers of the consequent face-off between Mistry and the Tata Sons board are still burning, a new controversy seems to be brewing—this time at the iconic Bangalore-based IT company Infosys. 

On Thursday, The Economic Times reported that ”concerted efforts” were underway to “ensure” that the “trouble brewing at Infosys” does not get out of hand. This, after reports surfaced that at least three co-founders—N R Narayana Murthy, Nandan Nilekani and Kris Gopalakrishnan—wrote to the board raising several concerns. 

The report said that among those involved in trying to diffuse a developing situation is Baburaj Pillai, a prominent investor in the IT giant, which is India’s second-largest software services company. 

What really is the controversy all about?

As the ET report points out, at the heart of the matter are some “internal governance issues” between some Infosys founders and a management “keen on charting a new path.” The report says that several reasons, including a big salary hike for chief Vishal Sikka, a handsome severance paid to former chief financial officer Rajiv Bansal, and the appointment of Punita Kumar-Sinha, a former chief investment officer at Blackstone Asia Advisors as independent director on the company’s board, have led to disquiet over the last year. Kumar-Sinha is wife of junior civil aviation minister Jayant Sinha and daughter-in-law of former finance and foreign minister Yashwant Sinha.

The letter by the three co-founders raised concerns over the increase in Sikka’s salary, which had been hiked to $11 million, including restricted stock options, subject to achieving targets. Former CFO Bansal quit in October last year with a severance pay of Rs 17.38 crore, which amounted to 24 months’ pay.

These, and some other reasons, the report says, have led some founders to believe that the board has been unable to enforce governance norms, resulting in the violation of “core Infosys values.”

Who is Baburaj Pillai?

Pillai, a Singapore-based fund manager, is chief executive officer at Arohi Asset Management Pte Ltd. An alumnus of Indian Institute of Management-Lucknow, he is said to exert influence on several top company boards in India, although he reportedly keeps a low profile. A June 2014 profile published by ET said that Pillai had invested in several tiny companies that had gone on to become household names. Pillai worked at the Government of Singapore Investment Corporation, before launching his own fund, the profile had said, although little else is publicly known about him. 

And what does the company have to say about the controversy?

Officially, the company has reportedly defended the move and issued a clarification: “The Board received suggestions and inputs from various stakeholders, including promoters, which are evaluated with due importance. The company will continue to be guided by the overall interests of all the stakeholders,” according to a report published by The Hindu Business Line.

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Trouble at the helm: Is Infosys headed the Tata Sons way?

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