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Yes Sikka's Infosys brought in revenue, but its governance got Murthy's goat

Neeraj Thakur | Updated on: 19 August 2017, 20:43 IST
(Vivek Prakash/Bloomberg/Getty Images)

The resignation of Infosys CEO and MD Vishal Sikka from the company's board has made the founder of India's second largest software company - Narayana Murthy- a villain in the whole saga.

Sikka's exit, though on expected lines, came after months of pricking by Murthy on the issue of corporate governance. The board of the company has backed Sikka against Murthy's allegations, calling them baseless and unfounded.

Investors as well as corporate experts, including pink papers, too show Murthy in a bad light by focussing on Infosys' revenue under Sikka in his three-year-long tenure.

Deteriorating standards

There is no doubt that under Sikka's leadership, the company reduced the gap between itself and the sector leader, TCS (Tata Consultancy Services) in terms of revenue growth and adopting automation.

However, the point that all those who back Sikka, have missed is that, Murthy's allegations have nothing to do with company's financial performance. Though, in one of his statement, he did ask the company about its ability to generate $20 billion revenue by 2020, but apart from it, there was nothing about revenue.

Murthy's prime concern was deteriorating standards of the company in corporate governance.

The topic is so vague and foreign in India's still evolving corporate culture that most people have easily bought the argument of Sikka steering the company forward in terms of revenue and getting bigger clients without demanding any answers on the allegations made by the founders of the company.

The ethics involved

But when someone backs Sikka and the Infosys management on the basis of company's revenues, he/she misses the importance of following the righteous policies in running an institution.

Corporate governance is important not for increasing a company's revenues, but to increase accountability of the company and to avoid massive scandal - like Satyam Computers - in the long run.

The ethics of corporate governance are also important to keep the employees of the company motivated and feel good about their association with the organisation.

So when the board of Infosys decided to dole out a high severance package to former chief financial officer Rajiv Bansal - 24 months’ salary (Rs 17.38 crore) - as compared to three months’ salary for others, it was bad for the morale of an average employee of the company, especially at a time when firing and low increments are the norm in the IT sector.

When employees lose faith in the management's fairness and see them favouring certain members in the top management, a decline in performance in imminent in the long run.

Similarly, the allegations of of anonymous whistelblowers alleging wrongdoing by Infosys during the acquisition of Panaya and Skava Systems in 2015 can also not be taken lightly. While the company did a good job by initiating an independent probe into the allegations by appointing law firm Gibson Dunn and investigation firm Control Risks, it was beyond anybody's comprehension as to why the reports produced on the issue were never made public?

The management of the company believed that posting a summary of the report was good enough. The move indicates only two things: either the management is afraid of the fine print of the report, or it simply does not understand the gravity of the charges levied against them.

In both scenarios, corporate governance takes a back seat and leaves one of India's modern age companies, vulnerable to a big scam in future.

Perhaps it is time that the India media and corporate houses start caring about governance issues in corporates.

First published: 19 August 2017, 20:43 IST
 
Neeraj Thakur @neerajthakur2

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