Bengaluru: The founders of Infosys Ltd have expressed unhappiness with non-executive chairman R. Seshasayee over some decisions taken by the company’s board in the past two years, and asked him to consider stepping down.
In the third week of December, founders including N.R. Narayana Murthy, S.D. Shibulal and Kris Gopalakrishnan had a meeting with Seshasayee and Vishal Sikka, Infosys’s chief executive officer, according to two executives familiar with the development. The founders expressed their unhappiness with Seshasayee, citing corporate governance issues.
“Infosys founders have lost all trust in the current chairman (Seshasayee),” said one of the two executives. “Seshasayee was non-committal, but he will go soon. The founders will wait for him to step down or they will seek a majority support at the board to vote him out.”
“The founders are even prepared to call in for a vote, if required, seeking his (Seshasayee) removal at an annual general meeting or even an extraordinary general meeting.”
In an email response dated 23 January, in response to a detailed questionnaire from dated 17 January, Murthy did not say if the founders had indeed asked Seshasayee to leave, but said that as a “well-wisher”, he offers “feedback” and “inputs”.
“Separately, as a well-wisher of the company, I continue to study the public decisions of the board and provide feedback and suggest inputs as I deem appropriate from time to time in order that the board stays close to the core values on which the company was founded,” said Murthy. “I am sure such feedback will be taken in a constructive spirit and actively considered by the board going forward. My views on certain items in the past 18 months are a matter of public record.”
Emails sent to other founders seeking a comment went unanswered.
Murthy’s is significant because this is the first time any of the founders has acknowledged offering feedback to the board.
Only five of the seven original co-founders, Murthy, Nandan Nilekani, Shibulal, Gopalakrishnan and K. Dinesh, are categorized as promoters of the firm, and together hold a 12.75% stake in Infosys.
An email, dated 17 January, sent to Seshasyaee seeking a comment went unanswered.
A spokeswoman for Infosys, in an email dated 30 January, said: “The queries raised by you are purely based on rumors and the company strongly rejects such baseless speculations.”
It is unclear if Seshasayee, who joined the Infosys board in 2011, will step down voluntarily, although a person close to him clarified there is no question of this happening. Seshasayee took over the current role in June 2015 for a period of three years.
“Infosys’s shareholders have elected the chairman to do a job. So, there is no reason for him to give up this job,” this person said on the condition of anonymity. “So, unless the chairman himself believes that he is not doing the job or the board loses faith in him or the shareholders vote him out, the question of him stepping down does not arise.”
The second executive cited in the first instance said Seshasayee may, to avoid a confrontation with the founders, step down.
The founders are unhappy with Seshasayee for three reasons.
Firstly, they are unhappy with the “non-transparent” manner in which the board decided to increase Sikka’s compensation to $11 million from $7.08 million. Although the board has linked Sikka’s annual compensation to the progress it makes in achieving the target of becoming a $20 billion firm by March 2021, the founders believe this target is a pipe-dream.
“Infosys will grow less than 8% this year and will end with about $10.2 billion in revenue (by March 2017). The founders know you cannot double the company’s revenue to $20 billion in four years. And now, with Donald Trump as (US) president, and the proposed changes in visas, even your profitability will take a hit. How will you take your margins to 30%?,” asked the first executive.
Secondly, the founders believe the Infosys board has always had people not related to politicians, and the current board’s decision to appoint Punita Kumar Sinha, wife of minister of state for aviation Jayant Sinha, as an independent director was wrong.The founders even expressed their unhappiness over both decisions, as some of them abstained from voting when the two resolutions were put to vote for nod from shareholders in April last year.
The third is a decision by the board to give its former chief financial officer, Rajiv Bansal, a very generous severance payment of Rs17.38 crore in October 2015, which rankled many of the founders. Infosys later stopped the remaining instalments of the severance payment after some of the founders expressed their unhappiness with the decision.
Significantly, it is because of these decisions made by the board that the founders convinced it to have D.N. Prahlad, a relative of Murthy, first appointed as independent director in October and, later, inducted on the board’s nomination and remuneration committee last month.