The Board of global software major Infosys Ltd on Friday blamed founder N.R. Narayana Murthy for the sudden and dramatic resignation of Chief Executive and Managing Director Vishal Sikka three years after he joined.
"Murthy's continuous assault, including his latest letter is the primary reason for the resignation of Sikka despite strong Board support," said the IT major in a statement here, hours after it accepted Sikka's resignation letter and appointed him as Vice-Chairman till the new Chief Executive was appointed by March 31, 2018.
Noting that a letter by Murthy attacking the integrity of the Board and the management for the alleged falling corporate governance standards was doing rounds in the media, the company said the Board took umbrage to its contents.
"Murthy's letter contains factual inaccuracies, already-disproved rumours and statements extracted out of context from his conversations with Board members," asserted the company.
The company also rejected speculation of discord between the Board and Sikka.
Assuring shareholders, employees and customers of not being distracted by Murthy's misguided campaign, the company said it would adhere to the highest standards of corporate governance as it executes its strategy of profitable growth for the benefit of all stakeholders.
"Murthy's campaign against the Board and the company has had the unfortunate effect to undermine its efforts to transform. The Board has been engaged in a dialogue with him to resolve his concerns over the year, trying to find solutions within the law and without compromising its independence. These dialogues have unfortunately not been successful," noted the statement.
Declining to speculate on Murthy's motive for carrying out his campaign, the Board believed it must "clarify the false and misleading charges", as they were damaging the company and misrepresented its commitment to good corporate governance.
Asserting that Infosys had delivered competitive financial performance through profitable growth since Sikka joined in August 2014, the Board said the company had articulated a strategy to transform for meeting the changing needs of the marketplace.
"The company was lagging behind the industry in growth rates when Sikka took over, and now we are in top quartile from a performance perspective. Revenue grew to $2.65 billion for the first quarter (Q) of this fiscal (2017-18) from $2.13 billion in the same quarter in fiscal 2014-15," recalled the statement.
Similarly, with 24.1 per cent operating margin for the quarter under reference (Q1), the outsourcing firm had beaten competitors for the first time in many years.
Likewise, revenue per employee grew for six quarters in a row, while attrition fell to 16.9 per cent in the quarter from a high of 23.4 per cent.
The number of 100-million clients increased to 18 in the first quarter of this fiscal from 12 in the like period in 2014-15 and increased large deal wins to $3.5 billion in this fiscal from $1.9 billion three years ago.
"Utilisation excluding trainees improved to a 15-year high in Q1 and to an all-time high, including trainees. Similarly, cash reserves improved and the employees were rewarded with a new equity plan," stressed the statement.
Noting that the company had maintained highest standards of corporate governance, the Board said it was carrying out its shareholder mandate to be independent and work in the best interest of all stakeholders.
The Board also sought counsel of governance experts and legal advisors, who investigated all anonymous allegations and concluded that no wrongdoing occurred in the acquisition of the US-based Panaya for $200 million in February 2015.
"For Murthy to imply with no evidence, that the law firms, Board members and certain employees are engaged in global conspiracy to conceal information is not tenable on its face," reiterated the statement.
As part of the investigation, law firm Gibson Dunn & Crutcher interviewed Murthy in the Panaya acquisition and asked him to provide information or evidence he believed would support the charges being investigated.
"Murthy, however, did not provide any evidence since none exists. However, he has not mentioned this in his letter to the media against the investigation," said the Board.
Hence, the Board has closed the investigations of the anonymous allegations so that the company could focus on strategy, performance, and the creation of shareholder value.
"The Board remains focused on supporting the company's strategy, which it believes is in the best interests of its investors, employees, clients and communities," said the statement.
On Murthy's repeated demand for stronger governance and changes in policy, else he would attack the board members in the public, a threat he carried out when it did not acquiesce, the company said Murthy had also demanded that the Board appoint specific individuals onto it under similar threat without disclosure and regard to basic determinants of appropriateness or fit of the candidate for the role as a Board member.
"Murthy has also demanded operational and management changes under the threat of media attacks. Notwithstanding that the remuneration package of senior management was approved by shareholders, including members of the promoter group, he preferred his diktat to prevail with no place for the outcomes of shareholder democracy," flagged the statement.
Clarifying that Murthy's each demand was treated as a suggestion and acted upon those which were in the company's interest, the Board said over time his demands intensified, which when declined resulted in the threats of media attacks being carried out.
The Board also expressed concern over Murthy's bid to engage in discussions with the company's certain key stakeholders to further his criticism of the Board and the management, and said such a campaign would run the risk of confusing investors and undermine the management's efforts.
"Given the Board's commitment to remain independent and pursue a chosen strategy, we have no intention of asking Murthy to play a formal role in the governance of the organization," reiterated the statement.