India: Infosys goes CEO hunting after Vishal Sikka resigns

Vishal Sikka resigned from Infosys, where he served as the first outsider CEO, and is widely credited with bringing innovation to he company. Source: Reuters

VISHAL SIKKA resigned from Indian outsourcing giant Infosys last Friday, sparking major drops in the company’s share price and a frantic hunt for a new chief executive officer amidst a board conflicts and the tumultuous era in the outsourcing industry.

The trouble at Infosys has cost them – company shares dropped 9.6 percent on Friday when news broke about Sikka’s resignation, taking with it US$3.5 billion worth of its valuation. The company responded by approving a US$2 billion stock buyback, but the evidence is clear: the markets are not happy with Infosys.

The former-CEO said that his decision to step aside was prompted by criticisms of his strategy and compensation from the co-founders of Infosys, reported Bloomberg. Following Sikka’s announcement, Infosys’ board condemned the actions of its co-founders, especially former Chairman, Narayan Murthy, for his role in ousting Sikka through “inappropriate demands”.’

The 71-year old former Chairman, Murthy, has long interfered with company affairs, in what is largely seen as his lack of desire to leave operations of the company he started with a clutch of other partners. The founders have outsized influence in the company as the group hold roughly 13 percent of Infosys’ shares as well as huge personalities in India’s technology and business space.

Murthy speaks during a dialogue session at the Asian Financial Forum in Hong Kong. Source: Reuters

A statement released by the company said that Murthy “may be in the process of engaging in discussions with certain key stakeholders of the company to further his criticisms of the board and management”. In contrast, Mohandas Pai, the company’ former CFO and a member of Murthy’s gang, told Bloomberg that the board is dysfunctional. The war of words between the two factions are indicative of the fault lines demarcating the factions threatening to upend Infosys’ future.

SEE ALSO: Infosys touts plan to hire Americans in face of visa pressures

These aren’t new issues, they’re the same ones that plagued Sikka during his tenure. The 50-year old is widely credited with working to bring Infosys into the digital age by fostering innovation, staunching the company’s brain drain problem, onboarding more corporate clients and growing the company’s margins by a reported 25 percent since he rose to the top of the company.

This stands in stark contrast with the company’s founding culture which is pervaded by Murthy’s sense of frugality – he founded Infosys in 1981 with money borrowed from his wife – and Gandhian values. Murthy has previously taken issue with Sikka’s chartered flights and prime real estate in California. Sikka was also the very first outsider to run the company after 30 years.

Murthy’s meddling and the board war taking place will likely make it difficult for the company to find a replacement for Sikka. Some names floated include insider Pravin Rao, who has been installed as an interim CEO, and the company’s current CFO, Ranganath D. Mavinkere, or “Ranga” as he’s also known. Ranga has long been close to Murthy, and has also won the praise of Sikka for his prudence with the company’s finances.

SEE ALSO: India: Infosys founder Narayana Murthy criticizes COO’s pay hike

The open hostilities will make it an unappealing job to many however – whoever replaces Sikka will have to deal not only with its founders but with Infosys’ uncertain place in the outsourcing industry. The company has seen significant blowback from US President Donald Trump who espouses inflammatory rhetoric on international trade issues, as well as attacks outsourcing companies in countries like India and the Philippines as main contributors to the US’s employment woes.

“It’s a tough one,” said Ashutosh Sharma, the New Delhi-based vice president and research director at Forrester Inc., said to Bloomberg. “They’ll find it hard attracting global talent of Vishal Sikka’s caliber.”

“Talented candidates will hesitate. They’ll wonder how much autonomy they’ll get as CEO considering all that’s happened.”