| 7 minutes read

7 minutes read

Vishal Sikka Resigns As Infosys CEO And MD After Personal Attacks, Shares Drop For Infosys

| Published on August 18, 2017

Vishal Sikka became the first non-founder CEO and Managing Director when he joined India’s second largest software company, Infosys back in 2014. After successful three years association, the news of his resignation was pretty much a shocker. According to reports, this came out as a rift between the company board and lots of other internal issues.

He has scripted a historic turnaround in the company in his reign making several developments and changes. His works include research in artificial intelligence, intelligent systems, programming languages and models, and information management.

Infosys revenues have grown from $2.13 billion in Q1 of FY15 to $2.65 billion this past Q1 in his reign!

They named U B Pravin Rao as Interim Chief Executive Officer and Managing Director. Though he resigned, the company confirmed that he would continue as Executive Vice-chairman. He will receive an annual salary of $1 while he stays. But Infosys shares have fallen drastically by 7 percent after this announcement.

In a filing to BSE, the company said,

“Sikka reiterated his belief in the great potential of Infosys, but cited among his reasons for leaving a continuous stream of distractions and disruptions over the recent months and quarters, increasingly personal and negative as of late, as preventing the management’s ability to accelerate the company’s transformation.”

According to sources, there was a rift between one of Infosys Founder, NR Narayana Murthy, and Sikka that led into creating differences in company’s operational policies. Murthy said in a press meet that the board members felt that Sikka was more of a CTO material and not fit for the CEO position. This was something that Infosys had already suffered before.

“A series of careful investigations found no merit to the unsubstantiated and anonymous allegations that had been asserted. The board denounces the critics who have amplified and sought to further promote demonstrably false allegations which have harmed employee morale and contributed to the loss of the company’s valued CEO.” as the explanation stated.

Infosys shares jumped 4.5 per cent on Thursday to close at Rs 1,021 and were its highest level since March 30.

“We expect Infosys to set buyback price at a 10-18 per cent premium over the current market price, in line with the buyback premiums announced by TCS, HCL Technologies and Wipro. The acceptance ratio should be high,” said Ashish Chopra, a technology analyst at Motilal Oswal Securities.

What Could Be The Reason?

1. The board was unable to uphold the company’s Governance standards according to Murthy.

2. A Mint report in August noted that Infosys was in a Mexican stand-off between founder and promoters. Murthy and Sikka had a kind of a rift!

3. A Mint report says 10 senior level executives holding the rank of associate vice president and above have quit since March 2017 last year.

4. Though the CEO aimed about doubling the revenues in future but the annual report mentioned no such targets.

“This will be the last year when we can be ahead of the curve in technology,” Sikka said earlier even before he resigned.

His Resignation Letter

Dear Board Colleagues,

Over the last few days, since our earlier call, I’ve met Sesh several times, talked to you individually at length, and spent time thinking things thru with Vandana. During this time, one of our employees, Sandeep Karamongikar, died in his sleep, likely of a massive heart attack. He was working on the chatbot front end in Nia. Also over the weekend, in possibly the greatest demonstration of AI capability ever, a bot built by the researchers at OpenAI (yes, that OpenAI), defeated the world’s best players of DOTA2, a multiplayer online video game, a game where the bot learned to play entirely from scratch. Further demonstrating that the force to automate routine, even advanced, activities is an unstoppable and exponential one. And the Charlottesville incident here in the US demonstrated once again the power of words and silences to cause real damage or to heal.

After much reflection, I have concluded that it is indeed time for me to leave my current positions as MD and CEO, and I have communicated my resignation to Sesh.

I will be working closely with Sesh, Ravi, Pravin, with all of you, and the senior management team to plan out the details and the timelines to ensure a smooth transition and in the meantime, continue our work without disruption, and ensuring that we protect our company, the employees, the clients, and the interests of every shareholder. You can count on my commitment to this.

I came here to help navigate the company through what I saw as a massive transformation opportunity, to transform our company and restore strong profitable growth, as well as help transform the business of our customers. I came to do this with the power of technology, given my experiences with similar transformations, my background in AI, and the structural changes that I saw happening in the IT services industry. This needed new skills, new thinking, new initiatives, and a transformation in the culture, from a cost-oriented value delivery, to entrepreneurship oriented value delivery. You have heard me articulate this many times before.

This type of a transformation has always been a passion for me, indeed I took this job for this reason. We have achieved much in the last 3+ years, and for sure we can all be proud of the powerful seeds of transformation that have already been sowed. No one anticipated the additional headwinds like the geo-political disruptions (Brexit, Trump, visa etc.) that made this transformation even more challenging, but also rewarding. But, the distractions that we have seen, the constant drumbeat of the same issues over and over again, while ignoring and undermining the good work that has been done, take the excitement and passion out of this amazing journey. Over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks. Allegations that have been repeatedly proven false and baseless by multiple, independent investigations. But despite this, the attacks continue, and worse still, amplified by the very people from whom we all expected the most steadfast support in this great transformation. This continuous drumbeat of distractions and negativity over the last several months/quarters inhibits our ability to make positive change and stay focused on value creation. Addressing the noise by itself is damaging; hundreds of hours of my own time has gone into this recently. But the structural challenges this engenders within the organization has a very damaging effect on our ability to carry out any kind of a transformation, especially one that is as fundamental as transforming from a cost-oriented to an innovation-oriented value delivery to clients.

Therefore, I have come to this moment and the end of this journey. I hope that it gives everyone a chance to reflect, and give the transformation effort another big push and move the company forward rapidly to build its future, to build upon the foundation that we have laid over these past 3 years. If these types of attacks continue, I hope each of you will continue to be the voice of fairness and reason – providing the active, emphatic and unequivocal support that the company, the management, the employees, and all of the stakeholders and friends of the company need in order to succeed. Since the board deeply believes in the cause we have started, I will be happy to support all of you to achieve a smooth transition, and serve as your Executive Vice Chair as discussed.

I would like to thank each one of you, my dear colleagues, my friends, and mentors, and look forward to working with you to close this chapter and open a great new one for all of us.


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