* Ongoing spat between founders, board complicates CEO
* External candidates are unlikely, analysts say
By Sankalp Phartiyal and Nivedita Bhattacharjee
MUMBAI/BENGALURU, Aug 19 (Reuters) – The dramatic departure
of Vishal Sikka as chief executive of Infosys,
following a months-long public battle with the tech giant’s
founders, has left the company with another messy problem: how
to find someone willing to replace him.
With the boardroom row still simmering, the pressure will be
on to do that fast.
The company’s last CEO hunt in 2014 was a major challenge.
Sikka, the eventual choice who was plucked from a top job at SAP
, was the first chief appointed from outside the group
of founders. His brief was to turn around a faltering business.
Three sources familiar with internal discussions three years
ago said they expected an even tougher challenge now.
“It was extremely hard to find an external candidate last
time, and the spat is going to make the job even more difficult
now,” said one of the sources.
“I think there is very little chance there will be an
The new boss will be taking on a company in better shape
than it was in 2014: Sikka has led efforts to diversify Infosys
away from basic IT outsourcing services into more lucrative new
areas, like cloud, automation and artificial intelligence.
Infosys’ share price surged 22 percent between Aug. 1, 2014,
when Sikka took office and Thursday, outperforming the broader
Nifty IT index, which gained 6.3 percent in the period.
But his successor will also join during one of the most
turbulent patches ever for the $150 billion Indian IT services
sector. The industry is facing squeezed margins, Brexit question
marks over European businesses, and uncertainty in the United
States, thanks to visa policy changes.
Infosys’ chairman, R Seshasayee, told reporters the company
would not look for a major change in culture or strategy and was
confident it could still attract talent.
“There may be some people who get excited by these kinds of
challenging situations,” said a senior Infosys source. “But
anyone who is comfortable and doing well will think long and
hard before taking this job.”
The company has not publicly identified potential
successors, though the interim chief executive Pravin Rao, CFO
Ranganath D Mavinakere, deputy COO Ravi Kumar S and Mohit Joshi,
the head of banking, financial and insurance services, are among
the top internal candidates, according to the company source.
In an unusual move, the board of India’s No. 2 IT services
company accepted Sikka’s resignation, but named him executive
vice chairman until a replacement was found. Rao reports to him.
The board also blamed Narayana Murthy – one of the company’s
co-founders, a heavyweight in Indian business and one of the
most vocal critics of the board – for the exit and for
undermining his efforts to transform Infosys.
That leaves any successor likely to continue to face a board
at odds with powerful minority shareholders: the men who created
the company and transformed outsourcing four decades ago.
Infosys and its founder executives, led by Murthy, have been
at odds since February. Sore points include increases in Sikka’s
salary, what they argue was the overpriced acquisition of the
Israeli automation firm Panaya and severance packages offered to
While the board has consistently backed Sikka publicly, some
shareholders like Avinash Vazirani of Jupiter Asset Management
say directors have not done enough to build investor confidence.
“I think the question is whether the board enjoys the
support of the investors and shareholders,” Vazirani said on an
investor call on Friday.
“There has clearly been a failure on the part of the board
to get the company in the situation where it is now.”
Infosys’ co-chair, Ravi Venkatesan, told investors on Friday
the board would seek to settle the dispute before making
permanent changes at the top.
“We will have to find ways to put this decisively to bed, so
that by the time we have a couple of viable candidates, there is
more stability,” he said.
Yet the abrupt departure of the man seen as an innovator in
the global software industry has raised fresh questions over
Indian corporate governance practices.
India will be the battleground for many such corporate
tussles as companies transition from founder- and owner-led
companies to entities run by professional CEOs and boards, said
Shriram Subramanian of InGovern, a shareholder advocacy group.
The public row at Infosys is reminiscent of Cyrus Mistry’s
unceremonious ouster in November as boss of Tata Group: another
professional chief executive exiting over differences with a key
shareholder – in that case, the Tata family patriarch, Ratan
“A belligerent attitude towards the founders of an iconic
company will keep friction levels high and the search for an
external CEO tough,” Ankur Rudra, an analyst with CLSA, warned
in a note.
(Reporting by Sankalp Phartiyal and Nivedita Bhattacharjee;
Additional reporting by Samantha Kareen Nair and Tanvi Mehta in
Bengaluru and Abhirup Roy in Mumbai; Editing by Euan Rocha and