Shriram Subramanian
Infosys BSE -0.99 % is going through a tough time and needs strong leadership at its top. However, the changes announced along with, and including, Narayana Murthy's return to Infosys as executive chairman are retrograde. When in trouble, Infosys has chosen to abandon the principles it professed on founders' retirement, nepotism and leadership development.
Till May 31, 2013, Infosys scored high on various corporate governance dimensions: one of few Indian companies to have an independent chairman on the board, to have retirement age limits for executive directors (60 years) and non-executive directors (65 years), and probably the only Indian company to have a policy of not allowing founders' children to take executive roles in the company.
On June 1, 2013, Infosys seems to have eschewed its principles for practicality. As a small shareholder and ex-employee of Infosys, I would like to see the company and its stock do well. However, it anguishes me that Infosys has let go of its principles. By reappointing Narayana Murthy as an executive chairman, the board and the nominations committee seem to have been ineffective in arriving at an orderly succession plan. The board seems to have found it difficult to find leadership both inside and outside the company.
The widely-held shareholding pattern and promoters' share being only about 16%, call for a natural transition to professional leadership. Infosys had always prided itself of strong leadership development, with both internal and external training for senior leadership roles. Infosys had groomed a set of tier-I leaders and executive council members, many of whom have been with the company for years. It is surprising that Infosys has found it wanting when it came to finding the right person for leading the company at the very top.
Of the 100 companies that InGovern analysed in the report India Proxy Season Analysis 2012, only 10 companies, including Infosys, had an independent director as the chairman of the board. InGovern has espoused that the chairman of the board should be an independent director. Infosys no longer falls in this set of companies.
The basic flaw of Infosys' strategy not playing out called for a change in leadership. Newer thoughts were needed. Bringing in a once proven executive team at the top doesn't make the company ready for the future. Everyone in an organisation will defer to an executive chairman, more so if the person is a founder. The culture of acquiescence and servility to the founder chairman may breed a culture of yes-men.
Infosys couldn't find the gumption to bring in a fresh leader: be it among board members, insiders or outsiders. Infosys has reportedly upped the retirement age to 75 years. If all the founders continue till that age, it will make it difficult for any non-founder professionals to aspire for leadership roles in the company. They have to perhaps be content with board positions.