Wednesday, June 19, 2013

Infosys surrenders its values - really?

After leaving Infosys in 2011, Mr. N. R. Narayana Murthy is joining it back as Executive Chairman, accompanied by his son. Also, he clarified that his remuneration during this period shall be Re.1 per year and that his son is joining as his Executive Assistant and is not aspiring for the CEO position.

This news piece has been on front page of almost all dailies over the last three weeks, with details as to how it will boost morale among the employees and questions like whether Mr. Murthy has, what is takes to turn around Infosys, when all experts feel that IT industry has completely changed since his last stint in a executive position in 2006.

Last week, I read an article by a renowned writer, questioning the comeback of Mr. Murthy, calling it, his attempt to save his own wealth (towards ~5% stake he & his family owns in Infosys) and thus counter corporate governance. It went on to the extent of saying that now all corrupt politician & corporate leaders will use NRN's example to justify practicing nepotism. The article left me thinking.

Is it correct to assume that all promoters / founders are poisonous to the business and to the concept of corporate governance, after it is listed? I find it hypocritical. Chasing cliche terms without focusing on real concerns therein, is a fallacy of today's corporate India. Take for example, Corporate Governance. A Promoter taking an executive role (lets call it CEO) in his own company is bad. Why? Because he is focused on increasing his own wealth. Why is that bad? In fact, a promoter turned CEO knows the company's DNA best and has his interests aligned perfectly (both monetary and emotionally). It is a normal practice across the world, that a professional CEO from 'outside' is required to have a minor stake in company or to link his remuneration to company's growth, to align his interests (at least monetary interests; we are still to even accept that emotional alignment is more important; probably because we have not yet figured out a way to control it). This practice is based on real human psychological setup that we feel motivated to a cause when we gain something out of it (mostly emotionally, especially at senior roles).

In my view, the real purpose of Corporate Governance is not limited to factually comply with the terms laid out in books like 'no related party', 'business on arms' length basis' etc, but to ensure that prudence is exercised and behavior is not guided in favor of a person's benefit at the cost of company & its business.

Coming to the case in point, it may be acceptable if critics question the decision of selecting NRN, saying that better alternatives were available with Infosys. In my view, however, Infosys did act for the benefit of its business. In all fairness, Mr. Murthy is the best bet, it has, to save its face. This is a solution, specific to Infosys, given its history & cliche placement in terms of its conduct and way of doing business and which is, more often than not, resonated in NRN (even after his exit from Infosys). Of course, this doesn't guarantee any improvement in performance of Infosys, but neither would have, an appointment of a CEO from 'outside'. A leader is always chosen on subjective grounds, specific to the situation at hand, at the time of selection.

Problem is that we try to see every situation with same pair of glasses. And this is practiced to an extent that the only factual compliance is of essence and thus, intentional compliance was not even worth 2 lines in that article.

Also, it may be noted that, I am not a NRN fanatic and don't swear by his integrity etc. So, I am not justifying his come back cause he is not taking any salary or that he didn't keep a secret about succession plans of his son etc. Nor, am I swearing by his capabilities to turn around the Company with a magic wand.

What I am questioning is the narrow scope of view about NRN's return (but not about bringing his son along; but, for now, I would give NRN a benefit of doubt on this and watch closely !) and relating it to breach of corporate governance. It is, in my opinion, important to give a context to a practice to be followed by a company and more so in the Indian settings, where most of the business is done in Indian way but evaluated (praised or criticized) on parameters borrowed from western countries.

Nevertheless, I hope NRN maintains a good arm's length distance !!!

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