Tuesday, August 29, 2017

The Economist on Murthy

The Economist compares Murthy and Bill Gates and exclaims:

"THE chairman of Microsoft, John Thompson, occasionally reminds one of its directors, a fellow by the name of Bill Gates, that his vote in board meetings is no more or less important than that of other members. Contrast that with Infosys, an Indian technology firm, whose own retired founder succeeded in getting its boss to quit on August 18th, after a months-long whispering campaign .The board was dismayed, but the outcome was all too predictable, given India’s penchant for treating corporate founders as latter-day maharajahs."

The magazine wisely adds, "Founding shareholders can be a resource for a company, but only if they know their place—in the boardroom, perhaps, but not on a pedestal."

The Economist also points out, "Mr Murthy has not received much in the way of gratitude for driving out Mr Sikka. Corporate-governance experts decried his method—notably a whispering campaign that suggested, but fell well short of proving, that Mr Sikka had profited from an acquisition Infosys made under his watch. Mr Murthy’s right to complain is also shaky. Though he is admired as a godfather of the tech scene, having pioneered the outsourcing model that has since become a major industry in India, he is a tiny shareholder in Infosys, owning just 0.38% of the company (his relatives own another 3% or so)."

Saturday, August 26, 2017

Nandan Nilekani's second innings

It is not politically correct to question the wisdom of Nandan Nilekani re-visiting Infosys. But one is taken aback by his hubristic remark that "there is nobody else. So, I had to come in. " Considering oneself as indispensable does not speak well of a leader. "I have a record of doing things successfully" is another boast (though this may not be far from truth)  he could have done without. Sometimes it is worth remembering that if one has not had failures, it means one has not tried enough things.

All this is not to belittle Nilekani's achievements. When deeds speak for themselves why should one belittle oneself through vainglorious utterances? Roll-out of Aadhaar is certainly a feather in his cap. Whether a sound move or not, Nilekani deserves appreciation for accepting the gauntlet with the hope of 'reviving' the governance culture of Infosys.

Having re-entered Infosys, Nilekani faulted in addressing the media without readiness to share relevant information. When asked if he would place in the public domain the investigation report on Panaya deal, he fidgeted saying that he would get briefed, study the reports with a calm mind and then decide whether or not to release the report. Release of this report was one of the major demands of Murthy. Has Nilekani spoken to Murthy on this?

Nilekani repeatedly asserted that he is the chairman of the company and therefore entitled to take appropriate decisions. Was it fair to deny the same privilege to Seshasayee? He told the media, "Give me the freedom to run the company and get it back to the path of progress." Is Murthy listening? Perhaps Murthy may not be so offensive to a fellow-promoter.

Nilekani seems to have understood the real problem facing Infosys. He kept saying how much he respects Murthy who gave him his first job at Patni's in Pune and who is "the father of corporate governance in India". Infosys' chairman needs to keep massaging Murthy's ego if he has to survive. But Nilekani has to decide: Who is more important, Infosys or Murthy?

Nilekani has clarified he would remain in Infosys till stability is established. In these VUCA days, stability is unknown. Nilekani may have to remain in the company for ever!

Friday, August 25, 2017

Corporate misgovernance

A new type of risk has been identified. It is called 'Murthy Risk'. It refers to the danger of a creator becoming the destroyer of what was created by oneself. This risk arises from the creator's possessiveness and gets aggravated by a 'holier than thou' attitude.

The recent contretemps at Infosys has been pragmatically solved by Nandan Nilekani's re-entry into the company. The chairman, R.Seshasayee has been shown the door though he has politely welcomed the development himself. He has exhibited his grace which is in marked contrast to Murthy's grouchiness.

Why did Murthy behave the way he did towards Seshasayee? Before hazarding my unfounded and probably prejudiced guess, let a few things be said about Seshasayee. The Hindu once reported,

"His (Seshasayee's) reaction to his upcoming move at Leyland from managing director to executive vice-chairman (from April) is similarly clear-headed. “It's necessary for the sake of the organisation to have a succession,” he says. “The next generation is coming up and we must make space for them.”It's all part of the larger evolution of his life, as he puts it: “You have to constantly ask yourself — where do I find joy next?”"

Seshasayee has a mature relationship with any position he occupies. While doing justice to the job on hand, he does not expect the relationship to last long. It is reported that when promoters opposed some moves made by Infosys while he was the Chairman, he offered to resign, but the Board asked him to continue. The promoters (mainly Murthy) have taken a different position from the Board now and made him exit.

There is an old news-report which says,"At the Infosys conference this Monday , board chairman R Seshasayee praised Punita, saying a woman should not be judged by the profession of her husband." 

Punita Sinha is a Wharton-educated distinguished professional who happens to be the spouse of Jayant Sinha, a minister in Modi's cabinet. Murthy criticised the appointment of Punita Sinha as a director in Infosys Board on the ground that it was political. Murthy's contention was misogynistic and smacked of opportunism to place Seshasayee on the mat. When Murthy was the chairman, Larry Pressler was a director on the Board. (Pressler is an American politician.) Was that okay?

Nilekani has said, "This company will be a Board-managed company." He could have added, "This Board will be a promoters-managed or more precisely Murthy-managed Board."

Seshasayee is a family-friend of Venu Srinivasan and Mallika Srinivasan. Murthy's son was earlier married to Srinivasans' daughter. Sometimes family happenings blinker one's professional vision.

Directors are elected by shareholders who alone have the right to sack them. Subjecting the directors' tenure to the whims and fancies of the promoter-clique operating from outside the Board is patently corporate misgovernance. He who 'walked away voluntarily' is not supposed to evict a Board-supported chairman and the directors who do not toe his line. Corporate democracy requires freedom from promoters' dictatorship.

A transient problem in a company has been resolved. But in the process, a timeless precedent of corporate misgovernance has been set.

Wednesday, August 23, 2017

System follows people

If people can misbehave, so can the system. The ugly confrontation between Murthy and the Infosys Board is closely followed by new bugs in the Finacle core banking solution. Finacle is a product of Infosys.

Bank of Baroda has notified its customers that it is migrating to an improved version of Finacle. Consequently, many deposit accounts have been unauthorisedly debited with various amounts. According to the bank's MD and CEO, the debits are being reversed on a war-footing.

It is a strange coincidence that Ravi Venkatesan, the co-chairman of Infosys is also the chairman of Bank of Baroda.

Tuesday, August 22, 2017

Narayana Murthy fails the 'FAT' test

Narayana Murthy, the anguished co-founder of Infosys, was never tired of saying that Fairness, Accountability and Transparency were foundations of corporate governance. Nobody can take exception to this motherhood statement. It is only fair that Murthy also is tested on this.

These three qualities are required not only of the company and its management, but also of its founders. Murthy has been less than fair in constantly sniping at the Board of Directors. He rightly expressed his concern over excessively liberal payments made or sought to be made to an ex-CFO and an ex-legal counsel. He went overboard in making this the litmus test of corporate governance. The Board and the Chairman were certainly on a weak wicket on this issue. Murthy exhibited his petulance by throwing a public tantrum over this. His call to the Chairman was : "Admit your guilt and quit." He prejudged the issue, converted a possible mistake into guilt, pronounced judgement and wanted his pound of flesh. He was atrociously belligerent.

Murthy was always diffident about inorganic growth. It is therefore not surprising that he cried wolf when Panaya was acquired. $200 Million may be small change for Infosys and Sikka, but it was a princely sum for frugal Murthy. Murthy started casting aspersions on Sikka by referring to association of a SAP executive with Panaya. The acquisition value was decided on the basis of due diligence by respected agencies. When Murthy cried foul, the Board appointed external investigators who found nothing amiss in the Panaya deal. Murthy was not convinced. He did not mind becoming a rebel without a cause.

As a co-founder of the company, Murthy is accountable to fellow-shareholders. Non-stop washing in public of dirty and not-so-dirty linen amounts to abdication of his responsibility towards other stakeholders in the company.

His transparency has been questioned by the Board which in a damning statement has claimed that Murthy desired his demands on appointment of directors be met without attributing the changes to him. This is stealthy secrecy and not trust-worthy transparency.

Murthy is reducing himself to a sanctimonious humbug. No wonder Omkar Goswami felt it necessary to address an open letter to him:


Saturday, August 19, 2017

Narayana Murthy's allegations

There is no doubt that Mr.Narayana Murthy has made serious allegations against the Board of Infosys. He has alleged that the company's governance standards have plummeted since he, his co-founders and early adopters like Mohandas Pai and Balakrishnan left the company voluntarily in 2014.

Murthy has demanded quite a few responses from the Board. Some interesting aspects are covered here. While reading these demands, doubts may arise in our minds. These are also pointed out.

"The most worrisome aspect of the whistle-blower accusation is his or her claim that there was an e-mail sent by Mr. David Kennedy to Dr. Vishal Sikka that Mr. Kennedy could not hide the Bansal agreement from the board and the CFO any longer. It is best that the company scotches this accusation either by denying the existence of such an e-mail with proof and clearing the names of both Mr. Kennedy and Dr. Sikka, or by explaining to the shareholders what action was taken against the individuals who hid information from the board and from the new CFO who signs the SOX statement. "
Doubt: In case such an e-mail does not exist, how does the company prove its non-existence? Presence is provable. Is absence also provable?

"The general belief among a large number of shareholders is that the current attitude of the board is a clear example of the worst board governance in India’s corporate history."
Doubt: Since Murthy believes in data and data alone, does he have enough evidence say by way of a survey to prove his contention?

"Several investors have expressed concern about the lack of transparency in the press release on the Gibson Dunn Crutcher (GDC) Report. The general impression in the market is that the Infosys board has spent lots of shareholder money in hiring expensive lawyers and obtained a clean chit for themselves from these lawyers. It is very important to remember that none of these expenses would have been incurred if the board and the company management had not committed serious mistakes regarding Rajiv Bansal agreement and David Kennedy agreement."
Doubt: Murthy raised doubts about these agreements with ex-CFO etc. necessitating further investigation. Is it proper for Murthy to blame the Board for ordering these investigations? Murthy has also clarified that he had advised Seshasayee to obtain investigation reports from impartial agencies (he had named a few including some former independent directors). Is it proper for Murthy to complain about the cost now? Of course, the Board did not go by Murthy's recommendation regarding agencies named by him.
"It would be proper for the board to put all the three investigation reports (Cyril Amarchand Mangaldas (CAM) Report, Latham and Watkins (LW) Report and Gibson, Dunn and Crutcher (GDC) Report) and the Panaya valuation report on the website of the company, and also provide a point-by-point denial of the whistle-blower accusations fully supported by data and facts. The whistle-blower has made serious allegations and just a top-level press release is not sufficient. The company should provide answers to the following questions emanating from the whistle-blower accusations. This should not be difficult since the board claims that three separate well-known law firms have investigated the issues thoroughly and since the board has spent huge amount of money on investigations."
Doubt: Murthy is unclear whether he says that the whistle-blower's accusations are fully supported by data and facts or he wants the Board to clarify with data and facts. Sowing seeds of suspicion by skillful positioning of words is an art.

"a. Can the company categorically deny that any employee and / or his / her relative (spouse, father, mother, brothers, sisters, nephews and nieces, children, spouse’s father, mother, sisters, brothers, nephews and nieces) benefitted personally in the Panaya acquisition?"
Doubt: Is it expected of any company to take a declaration from every employee that there is no personal benefit to him / her and relatives in an acquisition? Murthy would be justified in restricting his enquiry to directors and top management.

"c. If the answer to question 2a is YES, then can the company provide the names of Panaya investors related to Infosys employees with the nature of their relationship to the Infosys employee (spouse, father, mother, brothers, sisters, nephews and nieces, children, spouse’s father, mother, sisters, brothers, nephews and nieces) and the number of shares they held on the date that Panaya was acquired by Infosys?"
Doubt: Does Murthy mean 'if the answer is NO'?
"Has the culture of the company changed (since the founders left) to reward people who hide information from the board?"
Doubt: Good sarcasm.
One person has responded to Murthy's efforts to pin down the Board as follows:
Richard Armond: "Infy under Mr Murthy was a better managed company and grew much faster than under Sikka. Today Infy can barely keep up with the growth of its peer IT companies in India. There have been murders on campus and a rape. Yet, today deluded Infy employees are more rattled by Sikka's exit."
Doubt: Would Murthy's next missile deal with murders and rape in Infosys?

The Infosys imbroglio

The Infosys drama continues to play out with striking similarities to what tanspired in the Tata group when Cyrus Mistry was ejected out.

Vishal Sikka claims that persistent attempts by N.R.Narayana Murthy to malign the company's Board and top management derailed any move by the company to improve its performance. Murthy counters saying he is focusing on governance and not performance.

Sikka came from SAP, a renowned German company. Financial performance counts for every company and it is so for German companies also. Remember the Volkswagen scam involving tampering with fuel gauge ? Coming from such a background, Sikka puts performance over everything else including corporate governance.

Governance has both legal and ethical dimensions. Most CEOs prioritise the legal aspect over the ethical requirements. Laws are strictly defined. Ethics are not so. That is why people are more confused than enlightened when Ratan Tata boasts about the Tata Culture and Murthy obsesses with his version of Corporate Governance. Significance of ethics in management should not be trivialised. At the same time, we need to bear in mind that there are acceptable ranges in ethical behaviour. Anyone who has a smattering of Mahabharata would appreciate this.

Murthy carries a burdensome baggage. He feels adrift since leaving the company. That is why he made a comeback. Though for all outward appearances he welcomed professionalisation of management with the exit of promoters from management, he did not have a proper understanding of his self. He continues to be possessive about the company he and his co-promoters formed. His intellect which is not very sharp hesitantly accepts the need for professionalisation. But his heart continues to crave for active association with Infosys. He continues to suffer from Founders' Curse.

This dichotomy between what is good for one's creation and what is psychologically comfortable for oneself is not uncommon. The dissonance arising from this has to be resolved in a mature manner. If it is not resolved in time, it leads to street brawls like what we are witnessing in Infosys today.

Issues raised by Murthy are of course not trivial though they could have been sorted out in a less amateurish way. Persons like Seshasayee, Ravi Venkatesan ,  D.Sundaram  and Roopa Kudva are not men of straw and cannot be trifled with. So, Murthy's non-stop allegations against the Board (though he tries to sound a little more pleasant by seeming to accept their proven credentials) are in poor taste and are an inescapable consequence of his own split personality where brain and heart are at war.

Other promoters like Shibulal, Nilekani, Dinesh and Gopalakrishnan have maintained a dignified silence. This is at variance from the cacophonic support extended to Murthy by the former CFOs who were appointed by Murthy. Mohandas Pai has not covered himself with glory by egging on Murthy.

Murthy has been petulant. The Board has been flat-footed and out-manoeuvred by both Murthy and Sikka. Shareholders have learnt a painful lesson that neither promoters nor the management care for the company. If either Murthy or the Board does not exhibit flexibility in dealing with the other, a company that was showcased as an exemplar combining governance and performance would fall between two stools. Both Murthy and the Board owe it to the company and its shareholders to mend their ways.

Thursday, August 10, 2017

Makings of a banana republic

A banana republic is defined as
  1. "a small state that is politically unstable as a result of the domination of its economy by a single export controlled by foreign capital."

In contemporary parlance, any state where the rule of law does not prevail is named a banana republic.

If a state is not to become a banana republic, various institutions need to perform their role responsibly. In particular, the judiciary, the police, the election authority and the so-called nominal heads like the President and the Governor have to be true to their calling.

In this regard, India is in a perilous state for a long time. Judicial delays and motivated judgments are legion. The police dances to the dictates of political masters. The election commission seems to be on surer footing. President, Vice-President and Governors are at the beck and call of the party in power. Some of them become conscious of their duties only after demitting office.

Wednesday, August 09, 2017

Unruly BJP

BJP seems to bent on proving that it is as murky as any other political party.

The Kerala State BJP President is actively involved in medical college admissions scandal.

The son of the Haryana State BJP President was stalking and attempting to kidnap a lady in Chandigarh. The state government is doing its best to protect the criminal.

In Chandigarh, a BJP leader obstructed an ambulane which led to the death of a patient.

Power has corrupted BJP pretty fast.

Tuesday, August 08, 2017

Lessons from Ahmed Patel's victory

Ahmed Patel fought very hard to be elected to the Rajya Sabha once more. There was prolonged suspense before the votes were counted because of contravention of electoral rules by two estranged Congress members.

Two lessons are obvious from this episode. One is that the Election Commission is capable of resisting pressure from the government / ruling party to bend rules. This is a good example worthy of emulation by other institutions.

The second lesson is that BJP lost the contest because of its obsessive urge to defeat Ahmed Patel. It is this pathological urge that forced Amit Shah to have an unauthorised look at the ballot of two Congress members. Determination and persistence are desirable and productive. Excessive anxiety to score a victory at any cost is counter-productive.

Tuesday, August 01, 2017

As fleeting as --------

Phrases like "as fleeting as a rainbow" and "as fleeting as ripples on the pond" are out.

"As fleeting as the tenure of Donald Trump's staff" is in.