Can Infosys regain its ethical bellwether status?

By Pankaj Mishra

A CEO’s departure, controversies about board decisions sullied its impeccable corporate governance record.

Much before Infosys acquired a bellwether status for India’s technology stocks and investors across the world, its corporate governance became the gold standard for India Inc. From employee stock options to the detailed financial disclosures during financial earnings and beyond, everything Infosys did, forced others to follow and comply.


Amid past couple of year’s rollercoaster ride that saw CEO Vishal Sikka’s departure and the controversies surrounding the board’s decisions, there are unanswered questions that raise concerns about Infosys’ impeccable corporate governance record. The company’s severance package for CFO Rajiv Bansal is just one among several such questions. On Tuesday, an arbitral tribunal asked Infosys to pay Bansal the outstanding severance of Rs 12.17 crore with interest.

In a nutshell, the ruling means quite an embarrassment for both the company, and its iconic founder NR Narayana Murthy. While Infosys had filed a counter claim against Bansal for refund of Rs 5.2 crore paid already as part of severance package, Murthy had led the backlash against severance package for Bansal terming it ‘hush money’.

When I started tracking Infosys during early 2000 as a journalist, everyone warned me about how it was impossible to get any scoops out of Infosys because they “over reported” everything. There were no leaks, absolutely not even shades of any ethical breaches, and most importantly, the Infosys founders became the flag bearers of corporate governance.

In a Harvard Business School case study titled “Building Brand Infosys” published by Rohit Deshpande and Vidhya Muthuram in October 2012, the company was admired for having ‘built its reputation as the Indian IT bellwether whose credo was to under-promise and over-deliver’.

“Throughout its 31-year history, Infosys and its iconic co-founder, NR Narayana Murthy, were admired and respected for delivering excellence while conducting business in a legal, transparent, and ethical manner,” Deshpande and Muthuram added in the paper.

Everything seemed impeccable until Infosys faced the biggest test for any entrepreneurial venture in its life cycle -- the founders stepping down to bring an outsider to run India’s second largest software firm.

Murthy triggered scandalous controversies by questioning Infosys’ decisions to acquire companies such as Panaya. Murthy followed it up by questioning CFO Rajiv Bansal’s Rs 17+ crore severance package. When Bansal quit in 2015, the company had agreed to pay him Rs 17.38 crore as part of the severance package.

All this finally resulted in the ouster of Sikka in August last year, and the homecoming of Nandan Nilekani as Infosys chairman. Unfortunately, while the management changes seemed to have restored some stability on the performance front, the skeletons of the controversial past refuse to die down.

Infosys set the benchmarks for India Inc on the employee stock options front -- taking a startup public, ensuring board governance and so on. It inspired a generation of entrepreneurs to build and run startups with integrity and governance at the core. Today, it’s almost impossible to find a company with impeccable record that the next generation of entrepreneurs can look up to, follow the playbook. But Infosys is now struggling to keep its bellwether status intact when it comes to corporate governance faced with a midlife crisis.

The controversies surrounding Infosys’ decisions and the backlash led by its iconic founder Murthy underscore the need to redefine corporate governance in the new era. This will mean reimagining accountability of boards, code of conduct of the founders, disclosures surrounding sensitive company decisions, and so on.

The question is, can Infosys offer a new playbook for corporate governance in the new era?

Pankaj Mishra is the co-founder, writer and CEO of FactorDaily