Corporate friendship turned sour?

Vishal Sikka resigns as CEO of Infosys


Business & Politics

News - Biz@India

August 20, 2017

/ By / Kolkata

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Vishal Sikka was known as the CEO who walked barefoot on the grass lawns of the office premises

Vishal Sikka was known as the CEO who walked barefoot on the grass lawns of the office premises

Vishal Sikka, the CEO and MD of global outsourcing company Infosys has called it quits after his three-year stint at the company starting August, 2014. It is believed strict criticism from Narayana Murthy, co-founder of Infosys and former CEO is the primary reason behind the shocking resignation.

UB Pravin Rao has been named as interim CEO. Sikka will hold office as Executive Vice Chairman on the Board till 2018 or till new management is in place.

The Resignation Letter

Excerpt from Vishal Sikka’s mail to his employees read:

“After a lot of reflection, I have resigned from my position as your MD & CEO effective today.  A succession process has been initiated, with Pravin serving as interim MD & CEO, and I will work closely with the Board and management team over the next few months to ensure a smooth transition. In addition, I have agreed to serve as Executive Vice Chairman on the Board to further ensure continuity until the new management is in place.

For days, indeed weeks, this decision has weighed on me. I have wrestled the pros and cons, the issues and the counterbalancing arguments. But now, after much thought, and considering the environment of the last few quarters, I am clear in my decision. It is clear to me that despite our successes over the last three years, and the powerful seeds of innovation that we have sown, I cannot carry out my job as CEO and continue to create value, while also constantly defending against unrelenting, baseless/malicious and increasingly personal attacks.”

Bone of contention

“I was, and remain, passionate about the massive transformation opportunity for this company and industry, but we all need to allow the company to move beyond the noise and distractions,” Sikka mentioned in his mail to his employees following his resignation as the CEO and MD of Infosys.

Disagreements between Murthy and Sikka began as early in 2016 when the co-founders of Infosys disapproved after the board hiked Sikka’s pay by 55 pc upto a whooping $11 million. Sikka was re-appointed as MD and CEO with revised pay after a resolution was passed in his favour. During the same time, the Board approved INR 173.8 million severance pay to ex-CFO, Rajiv Bansal thereby upsetting the co-founders led by Murthy more. Later that year, Infosys stopped payment of severance package to Bansal. In the meanwhile Infosys welcomed DN Prahlad as an independent director at Infosys, who happens to be a relative of co-founder Murthy.

By 2017, the Infosys founder-promoters and Board and Management were at loggerheads over corporate functioning and conflicts despite the success rate proving them (founder-promoters) otherwise. Murthy publicly started criticising the board and management for “lapses in corporate governance.”

Sikka’s high-salary has always been a primary point for tiffs between Murthy and Sikka. It is believed that at one point, Sikka’s salary has been higher than any of his peers at a staggering INR 487.3 million in FY 15-16. Only next to him is TCS CEO, N Chandrasekaran with INR 256.6 million in FY 15-16.

It was until recently that Murthy claimed that three independent directors of Infosys told him that Sikka was more suited as a CTO as opposed to a CEO.

An official communication released by the Bengaluru-based Infosys’ board stated, “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.”

Where does Infosys stand?

According to Vishal Sikka’s mail where he cited Infosys’ growth in the recent years, “We have grown our revenues, from $2.13 bn in Q1FY15 to $2.65 bn this past Q1. We did so while keeping a strong focus on margins, closing this past quarter at 24.1 pc operating margin, beating some competitors for the first time in many years, and improving against most in our industry.  Perhaps more importantly, our revenue per employee has grown for six quarters in a row. We grew our $100 mn+ clients from 12 when I started, to 19, and increased our large deal wins from ~$1.9 bn in FY15 to ~$3.5 bn this past year. We’ve done all this while improving our overall utilisation, to a 10-yr high this past quarter, and an all time high including trainees, while improving our cash reserves, rewarding employees with a new equity plan, and returning cash to our stakeholders. And we have done all this while improving our standing with clients to the highest ever in the 12 years since we’ve done our client satisfaction survey, and a jump of 22 points in CxO satisfaction.”

Ravi Seshasayee, who leads Infosys Board states, “There is no dissent among Board members. The board tried its best to address the concerns of the co-founders, but with limited success. There will be no change in buyback plans, none of the projects in motion will be stopped.”



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