Infosys names Ravi Venkatesan co-chairman to placate promoters

BENGALURU | MUMBAI: Infosys, bedeviled by headwinds that are dragging down growth, has moved to placate its promoters by appointing a co-chairman to the board of the Nasdaq listed company while also pointing to “distractions” which it said had contributed to a below par performance in the previous quarter.

Board member and former chairman of Microsoft India Ravi Venkatesan will be the cochairman of the Infosys board alongside R Seshasayee, even as talks continue with institutional investors and promoters to defuse the heated spat over allegations of poor governance at India’s second-largest software services company, levelled by founder NR Narayana Murthy in February. Castigating the board for what he termed as falling standards of governance, Murthy had called for the appointment of new board members and also a co-chairman. Acknowledging the impact of these demands on the information technology company’s operations in the January-March quarter, Infosys chief executive officer Vishal Sikka said, “The atmosphere became tougher … the reality is that especially over the last quarter, generally, there have been distractions and noise. We have to deal with this.”

India’s $150-billion outsourcing industry has been battling a series of challenges ranging from visa regulations to pressure on margins from increasing automation of IT services.

Industry lobby Nasscom has not yet given a growth target for fiscal 2018, citing macroeconomic uncertainty.

Infosys, which disappointed investors due its tepid outlook for the year, has faced extra pressure also due to the ongoing spat over its governance. The attempt to alleviate the friction between management and promoters is also aimed at clearing management focus to deal with operational hurdles that lie ahead. “I am happy that the promoters feel comfortable about the decision taken,” R Seshasayee, chairman of Infosys told ET although he was at pains to clarify that “Ravi’s name did not come from the promoters”.

“We don’t need somebody else introducing Ravi to the board. He is a part of the board and, so, it is a natural choice,” said the 69-year-old who was appointed to his post in 2015. The decision to bring in Venkatesan is designed to increase the board’s ‘bandwidth’ and “ensure the transformation journey we have charted out is completed as smoothly as possible”, Seshasayee said. Murthy declined comment on the appointment.

Venkatesan, who has served on the Infosys board for over five years now and was part of the search process that identified and appointed Sikka as chief executive officer of the company in 2014, said the division of roles between Seshasayee and himself will be fluid. He (Venkatesan) would likely take the lead in matters of strategy while Seshasayee would be responsible for governance and talking to investors.

“We have decided that we would have a working partnership for collaboration. There is a very long set of things to focus on, some of which is external and some internal. On some of them he will take the lead while I play the supporting role, in other things I will take more of a leadership role while he and other take the supporting role,” he said.

In pic- Tech titans: (from left) Chairman R Seshasayee, Co-Chairman Ravi Venkatesan, CEO Vishal Sikka and COO Pravin Rao

Experts are of the view that this unusual structure raises more questions than provide answers. “The role of the co-chairman needs to be defined in this situation. We know the chairman calls the meetings and is responsible for governance, but what would the cochairman do?” said Shriram Subramanian, managing director of shareholder advisory firm InGovern.

DOUBTS REMAIN
Other company watchers doubt whether these moves will lead to a cooling of tempers and also address the charges of flawed governance.

“We had asked for the chairman to step down so the investigations into the governance actions could be taken by someone independent,” said V Balakrishnan, former Infosys executive and vocal critic of the management. “I do not see how this co-chairman improves the governance,” he said.

Murthy, in an exclusive interview to ET, had questioned the decision by the company to pay a hefty severance package to former chief financial officer Rajiv Bansal, holding Seshasayee and remuneration committee head Jeffrey Lehman responsible.

While Infosys has appointed Cyril Amarchand Mangaldas to create a framework for its interactions with key stakeholders and governance, the board has already been meeting investors.

“The engagement with the investors is something that we have already started. We have been talking to key investor groups to get their inputs on various matters relating to the composition of the board and the like,” Seshasayee said. He added that the company’s institutional investors had not raised concerns about governance but were keen that the issues be sorted out as quickly as possible.

In addition to battling its irate founder, Infosys is also investigating a whistleblower letter sent in February. The letter alleged irregularities in the acquisition of Israeli technology startup Panaya and conflicts of interest. The board has brought in an independent outside firm to help with the investigation.

“There is an independent firm doing an investigation, again in the normal course we would do for any whistleblower complaint. This is also being done in the same manner. In this case a global firm has been engaged,” Seshasayee said.