Nobody can stop Narayana Murthy from guiding Infosys as shareholder

Days after the mutiny at Infosys that led to the ouster of its CEO, India Inc was nearly unanimous in its judgment. It vociferously opposed the hounding of the management by founders, while an insignificant minority supported vigilantism by promoters to protect companies from the collapse of governance. Their priority was well-defined--an uninterrupted growth in share price growth by hook or by design. They followed the clarion call by former Infosys director, Omkar Goswami to Narayana Murthy: "Walk away before you further destroy your reputation and debilitate Infosys."

When a nasty corporate acrimony smokes out around Rs 20,000 crore in market cap (now down to Rs 2,09,598 crore), such reactions are natural. Corporate governance becomes an 'issue' only when it begins to hurt the share price. Till then, it is a hated genre -- shareholder/promoter vigilantism. Infy stock, now available at a deep discount at Rs 912 per share, 26% less than the buyback price of Rs 1,150, surely looks a sweet candy for retail investors, given that the Sebi rule that prescribes 15% reservation for those holding shares worth up to Rs 2 lakh.

But Infy faces several challenges ahead.

Nandan Nilekani, at 62, has a Herculean task at hand. His search is on for someone who can "demonstrate excellence in a challenging global environment", show technological prowess, and who is comfortable with the firm's cultural transformation. The candidate should also "align well with the ideas of the stakeholders", of course, to avoid future collisions. The attributes are not distinctly different from those when Infy crowned Sikka at its helm three years ago.

The Board meeting on August 25 issued a carefully-worded apology without damaging both sides. It said it was not its intention to cause Murthy or any other affected person any personal distress or anguish while stating its point of view. The Board, which came out strongly in favour of Sikka earlier, had blamed Murthy's continuous assault for CEO's exit, and ruled out a formal role for any co-founders in the company's governance. Now that Nilekani is on board, it is humming the familiar 'corporate governance' tune.

According to Goswami, Murthy had publicly pressurised the Board to conduct a legal-cum-forensic investigation on the $200 million acquisition of the Israeli software firm Panaya following a whistle-blower complaint in February.

It was done. Then there were allegations of hush money for former CFO amounting to an astronomical Rs 17.5 crore. The Board had to freeze the remuneration after paying out 30% of the agreed money. There were also allegations of chartering private jets to the US frequently, appointment of a Union minister's wife on the Board, higher salaries and performance-linked bonuses for its CEO, and such. The Board then gave into Murthy's demand by elevating Ravi Venkatesan as co-chairman. If the Board was "collectively timid" as suggested by Goswami, it has no right to remain there.

Murthy's response to the previous Board's strong words that he would respond at the right time later was construed by many as weak-kneed. The uncrowned founder didn't remind anyone that he built Infy from the scratch with his blood and sweat. He said he is "not seeking any money, position for children or power". But he is a shareholder. No one should take away from him his rights as a shareholder.

The writer is editor, DNA Money.