Saturday, February 11, 2017

Infosys, dust off the slogan “Powered by Intellect, Driven by Values”?

Years ago when I worked for the software services giant, Infosys, the corporate tagline was “Powered by Intellect, Driven by Values.” It perhaps symbolized the quintessential Indian middle-class values of service and sharing, values that prompted the founders to share the wealth they created by giving away stock options, grants and ESOPS to hundreds of early employees. This story was the stuff of corporate legends in the nineties through 2000s.
The founders took turns running the business, and had an astute sense of the market and a handle on public relations, at least in India. Of course, the company was a media darling and could do no wrong. Occasional incidents involving employees or its executives – like the Phaneesh Murthy scandal or investigation over H1 Visa-fraud – were shrugged off as one-off.
The co-founder-CEOs, vested with millions in stock grants and options, had little need or interest in begrudging “pay and bonus” of a fellow co-founder. They didn’t feel the need to voice their opinion in public, especially since they also enjoyed a seat at the board. This was also a time of tremendous growth at the company. The founders and employees who joined early were happy: their stocks and options were rising with the tide of offshoring.  
As a former-employee continuing to hold a percentage of his net-worth in the company’s stock, I try to stay updated on the news about the company: Infosys continues to be in my list of RSS reader searches that I periodically browse. Fast forward to present day Infosys where there seems to be a nexus of forces at play.
  • The pace of growth in the business of offshoring has slowed down considerably. The industry is bracing for headwinds in key markets - thanks to Mr. Trump in North America and Ms Theresa May in Europe – and clients of offshoring services are taking a wait-and-watch when it comes to big technology investments. The stock market is beginning to discount the valuations of Indian software service firms.
  • The board-of-directors of the company now consists primarily of non-founders. (ref: Infosys) The venerable Narayana Murthy stepped down as Chairman of the board in 2015, though his opinions continue to be quoted as gospel by the media. After all, the “promoter & promoter Group” still hold about 12.75% of the total number of shares which gives them a significant voice. (ref: Infosys holdings)
  • A couple of years ago, the board selected Vishal Sikka as the first outsider CEO to lead the company. After Mr. Sikka took charge, there was a large-scale churn of senior executives.
The latest series of headlines seem to be centered on “governance” of the company, primarily on the multi-million-dollar compensation being offered to the CEO, and a large exit package for its former CFO. (ref: NDTV summary) The jury is still out on Mr. Sikka’s scorecard and performance during the past couple of years. By many accounts, the company hasn’t done much worse (or better) than peers in the business of offshoring IT Services.
In a public company, small shareholders like me are generally inclined to trust the checks and balances in the system. And that the board of directors elected by the majority of us are executing on their fiduciary duty. This goes to the heart of corporate governance.
As a passive stakeholder, I left shaking my head over this “controversy” surrounding the company, wondering if this is a case of a storm in a teacup orchestrated by the media-and its founders founder (ref Prabal Roy’s writeup ). Or if the smoke blowing out of Electronics City is an indicator of a major fire. Either way, it is perhaps time for Infosys’ board to dust off the slogan “Powered by Intellect, Driven by Values,” and focus on re-communicating its values.