Infosys: The $200-milion deal that broke it all between Vishal Sikka and Narayana Murthy
The first non-promoter CEO and MD of Infosys Vishal Sikka resigned on Friday. The board not-so-subtly attacked founder N R Narayana Murthy for their 'valued' CEO resigning. Not the one to keep mum Narayana Murthy hit back in equal measure. The ugly spat has its roots in a $200-milion deal mired in controversies. Here is what broke it all between Vishal Sikka and Narayana Murthy.
A lot of dirty linen had been washed in public since the beginning of 2017. The root cause of Murthy's anger, however, was a 2015 $200-million deal between Infosys and Israeli cloud company Panaya. Vishal Sikka's team pulled off the deal with great zeal but in February 2017 an anonymous complaint claimed that the deal was overvalued. The whistleblower complaint was referred to an internal inquiry team. However, the team gave a clean chit to those involved in the deal.
An anonymous whistle-blower complaint to the SEBI in February 2017, alleged that $200-million Panaya acquisition was overvalued. The complaint alleged that the "unusually high" severance package to former chief financial officer Rajiv Bansal was not disclosed at the time. In fact, the complaint alleged, Rajiv Bansal was not in favour of the acquisition, raising doubts over the deal going through while Rajiv getting a higher severance allowance.
Questions were also raised on the high severance package to general legal counsel of Infosys David Kennedy who allegedly wrote an email to the CEO that he could no longer hide Bansal's severance package. An internal investigation, set up by the same people who succeeded in the deal, gave a clean chit to the deal. While the probe body deemed the complaints false with no evidence of wrongdoing, it refused to make the findings public.
Narayan Murthy in a letter on Friday questioned the clean chit issued to those involved. He demanded that the investigation reports be made public. He further asked why the board was unwilling to explain the basis on which a clean chit was given. "A report produced by a set of lawyers hired by a set of accused, giving a clean chit to the accused, and the accused refusing to disclose why they got a clean chit. They say that this is not the way an impartial and objective investigation should be held," read Narayana Murthy's letter.
Infosys' first tryst with 'outsider' CEO ends in disaster
Vishal Sikka quits the company and leaves behind a divided board. Infosys's experience with its first 'outsider' CEO has not gone down well. This time around, the company seeks to find one from within. Some of the members are also in favour of Nandan Nilekani's return.
Other issues between Sikka and Murthy
The Panaya deal and its investigation were the last nails in the coffin but trouble had been brewing for some time now between Sikka and Murthy. While the board, in support of Sikka, made Murthy seem like a founder unwilling to let go of the company, a quick look at what has transpired will probably display a better picture. Murthy alleged that the Board has failed in keeping checks and balances in place and indulging in improprieties that could spell doom for the company and its investors.
Apart from the Panaya deal, Sikka's salary, appointment of Punita Sinha, the wife of MoS Finance, Jayant Sinha as independent director, Sikka's push for acquisitions added to the straining relationshsips between Narayana Murthy and Vishal Sikka.