The long-drawn battle between Infosys Chief Executive Officer & Managing Director Vishal Sikka and the group of promoters led by NR Narayana Murthy came to an abrupt end on Friday. Sikka sent shock waves through the corporate world by submitting his resignation that led to a free fall in the prices of Infosys shares and created mayhem in the stock market.
The news wiped off Rs 30,000 crore (11%) off Infosys’ investor wealth, as the market value of the company dropped to Rs 2.04 lakh crore from Rs 2.34 lakh crore. Narayana Murthy and his family, who together have 3.44 per cent stake in Infosys, lost Rs 1,000 crore.
As an interim measure the Infosys Board appointed UB Pravin Rao as interim MD and CEO.
After three years at Infosys, Sikka resigned over what he called “unrelenting, malicious, personal” attacks on him. In August 2014, Sikka took the helm of the second-biggest software services exporter in the country founded by Murthy and six others in 1981.
An email written by Murthy to some of his advisers is reported to have provoked Sikka to put in his papers. In the email, which was “leaked” to the media, Murthy had claimed that at least three independent directors at Infosys told him that Sikka was more Chief Technology Officer (CTO) material than CEO material.
In his resignation letter, Sikka reiterated his belief in the great potential of Infosys, but cited among his reasons for leaving, “a continuous stream of distractions and disruptions over the recent months and quarters, increasingly personal and negative as of late, as preventing management’s ability to accelerate the company’s transformation.”
In a letter addressed to employees on his blog, Sikka said, “I cannot constantly defend myself against unrelenting, malicious, personal attacks.”
He said it was clear to him that despite the success Infosys witnessed over the last three years, and the powerful seeds of innovation that the company had sown, “I cannot carry out my job as CEO and continue to create value, while also constantly defending against unrelenting, baseless/malicious and increasingly personal attacks.”
On his part, Murthy denied charges that he was the reason behind Sikka’s decision to resign.
“I am extremely anguished by the allegations, tone and tenor of the statement. I voluntarily left the Board in 2014 and am not seeking any money, position for children or power. My concern primarily was the deteriorating standard of corporate governance which I have repeatedly brought to the notice of the Infosys Board,” Murthy said in an e-mailed statement.
The statement also said, “It is below my dignity to respond to such baseless insinuations and would reply to allegations in the right manner and forum and at an appropriate time.”
While accepting his resignation as CEO and MD, the company Board fully backed Sikka’s reasons for quitting.
“The Board understands and acknowledges Dr Sikka’s reasons for resignation, and regrets his decision.
In particular, the Board is profoundly distressed by the unfounded personal attacks on the members of our management team that were made in the anonymous letters and have surfaced in recent months. As the Board has previously stated, a series of careful investigations found no merit to the unsubstantiated and anonymous allegations that had been asserted. The Board denounces the critics who have amplified and sought to further promote demonstrably false allegations which have harmed employee morale and contributed to the loss of the company’s valued CEO,” it said.
The Board thanked Sikka for his outstanding leadership of the company, and for his extraordinary contributions during a period of rapid evolution in this industry. The Board also appreciated his commitment to facilitate a smooth transition to new leadership fully equipped to lead Infosys forward in this new era in our industry and to ensure continuity in our service to our valued customers. Consequently, the following arrangement (for which shareholder approval will be sought, as applicable) has been put in place as of today:
The Board saidDr Sikka has been appointed Executive Vice Chairman and will hold office until the new permanent Chief Executive Officer and Managing Director takes charge, which should be no later than March 31, 2018.
Dr Sikka will continue to focus on strategic initiatives, key customer relationships and technology development. He will report to the Company’s Board. UB Pravin Rao has been appointed Interim Chief Executive Officer and Managing Director reporting to Dr. Sikka under the overall supervision and control of the Company’s Board.
The Board has mandated the Chairman and the Nomination and Remuneration Committee to expeditiously identify and select a permanent CEO and Managing Director.