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If Infosys' performance slumps in the next few quarters, shareholders might lose confidence in the CEO.
Despite support from board members, performance of Infosys in the next few quarters will be highly crucial for the survival of chief executive officer Vishal Sikka in the company.
The past week saw India's second largest information technology company being broiled in controversies as differences cropped up between its founders and board members. Despite allegations of lapses in corporate governance in the company, the Infosys board, led by its non-executive chairman R. Seshasayee has expressed strong faith in Sikka, the first non-founder chief executive of the company.
However, if the company performance slumps in the next few quarters, shareholders might lose confidence in Sikka and the latter may find himself in troubled waters again.
“Although Sikka is trying his best to bring in new innovations and strategies in the company despite the challenging environment, his performance has not been anything great or exemplary to make him stand out,” Alok Shende, of Ascentius Consulting told THE WEEK. “We have seen that over the last one year or so, the performance of the company has not been that great. It will take at least two or three more quarters to judge that.”
Currently, while the co-founders have questioned Sikka's high compensation package, this is unlikely to have a major impact in boardroom decisions since the former holds only a minority share and hence, do not have much say to influence the board.
Shende feels that things may also change if a few of the non-founder shareholders start questioning Sikka's performance and his compensation package. “Though many investors have imposed faith in Sikka they may turn against him if the performance keeps going down in the near future,” he said.
However, if founder Narayana Murthy has his way and Seshasayee is shown the door, Sikka's position will be shaky and he may eventually have to leave the company, according to experts. They add that though there have been lapses in company governance, such issues are quite common in firms these days. At many companies, executives at the CEO level exercise a few privileges, which are often accepted by the board.
“Narayana Murthy used to travel economy class even for foreign trips but you cannot expect the same from a new-age professional CEO heading a multi-billion dollar organisation,” said Kris Lakshmikanth, founder of the recruitment firm Head Hunters India Limited. “I don't find anything wrong in Sikka using private jets for some trips in the US. Many other CEOs do it and there is nothing unusual about it. Most of the company boards generally overlook such things.”
Industry experts feel that Murthy had set up high standards for Infosys when he was at the helm of affairs, but off late there has been a dwindling of standards, especially when it comes to choosing board members. There are also reports that appointment of law firm Cyril Amarchand Mangaldas to engage with the company’s founders and deal with issues of corporate governance has not been welcomed by many in the company.
“The appointment of Punita Kumar Sinha, wife of Union Minister Jayant Sinha, as an independent director last month did not go down well with many and created a controversy. It needs to be seen what kind of people are chosen to the board and if they align with the standards set up by Murthy,”said Shende.
