It sectors and the founders who were accustomed to

It all started with Vishal Sikka announcing his sudden resignation
from the Chief Executive Officer (CEO) position of
Infosys. Due to which Infosys Ltd.’s shares fell more than 12%. He was the first non-founder CEO of the company.

 

Vishal Sikka had been trying to
transform the IT giant into a new-age tech conglomerate for the past three
years and thereby put Infosys on the right financial track. He attempted venturing into these disruptive sectors and the founders who
were accustomed to making profits through labor arbitrage did not feel
comfortable with such moves.

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The founders at Infosys seem to be having a
tough time letting go of their control over the company. Mr. N Narayana Murthy,
co-founder, has strained relationship with the board.  He raised many corporate
governance issues with the board.

The issues raised by Mr. Murthy against the new
management led by Mr. Sikka were:

·      High severance
package of   23 crore to Rajiv Bansal who quit as Infosys
CFO

·      The
$200-million acquisition of Israel-based IT company Panaya

·      The abnormal
pay hikes for some of the executives.

 

Murthy’s latest accusation is that the investigation reports
commissioned by the Infosys board relating to corporate governance concerns are
to be made public.

 

These open personal accusations against Sikka and his new
management have drastically affected the business of Infosys. Foreign
investors, whose ownership in the company had dropped from 40.4% in the
year-ago June quarter to 37.5% in the preceding quarter. Another important
result of the feud is the level of uncertainty with another leadership
transition—the fourth in the past 10 years—and  also have to be contend with the rapidly
increasing hostility between the company’s board and its founders.

 

The reason for this is possibly that they gave “higher weight to
recent issues with promoters or senior management attrition”. Another
prospective problem is

 Who would want to apply for the Infosys CEO’s position,
after what happened to Sikka?       

 

The leadership succession planning, defining clarity
of roles and the corporate governance all plays a crucial role in determining
the sustainability of large firms such as Infosys.

1.    Why this
happened?

2.    The fallout
of wat happened at Infosys on various stakeholders (Systematic behaviour and
the response to the crisis)

The first non- founder CEO of Infosys, resigned as MD and CEO on 9th
August 2017. The resignation had a very negative impact on the share prices of
Infosys. The shares got down to 13% and eroded Rs 24,839 crores from the market
valuation. On the NSE the stocks came down to 13.38 % and was the lowest in the
year with Rs 884.20. Finally, the shares were settled at 9.6% which was Rs
923.10 on the BSE and Rs. 923.15 on NSE. This was the worst performance in the
Infosys history of the share prices.

The following changes were done in the management:

Sikka resigned and said that he faced “false, baseless, malicious
and increasingly personal attacks”. Pravin Rao was appointed as an interim CEO
and Sikka was appointed as Executive Vice Chairman until new CEO was appointed.