Murthy’s remorse: Was his decision an opportunity loss for Infosys?

It’s safe to assume that the remark is likely to be about his son, Rohan Murthy, given that of all the company’s founders he’s the only one to have had a stint in Infosys. That just as genes cannot guarantee corporate leadership success, equally they cannot be the overriding grounds for disqualifying worthy candidates is a valid argument. Murthy is essentially arguing for extending meritocracy to children of promoters. 

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All the same, Murthy had valid reasons for precluding scions of Infosys founders from entering the portals of India’s first enterprise built by middle-class South Indians – as he went on to explain: “That point in time probably I embraced the idea because I was afraid that some people may bring undeserving candidates and put them in positions and I wanted the future of the organization to be strong”.

“Sorry” and “I was wrong” are not words one hears often in the corporate world. Murthy’s remarks are creditworthy, and underline his passion for the company he co-founded with his six friends in 1981. 

The question that emerges, though, is: Was the disqualification an opportunity loss for Infosys?

It’s easier to analyse and evaluate things in hindsight. Mint has documented shareholder wealth created by Infosys and new business acquired by it under chief executive Salil Parekh, a former Capgemini executive, over the last five years. On both counts, the performance has been better than during the tenures of his predecessors. An uncontested fact remains that Infosys has done well under him — arguably, better than under any of the four co-founders. Managing an IT services company like Infosys, with over $17 billion in revenue and 3,45,000 employees as of 30 September, requires extraordinary leadership. 

Rohan, a doctorate from Harvard, has the chops and understands the technology landscape. His stint of less than a year at Infosys, when he returned as an executive assistant to his father back in 2013, wasn’t smooth. It coincided with several senior-level exits. The jury is still out on how his eight-year-old and privately held Soroco, which promises to improve productivity at firms, has fared. 

How have Infosys’ peers tackled this issue? Shiv Nadar’s daughter Roshni Nadar took over as the HCL Technologies chairperson in 2020. Rishad Premji, after having worked across roles for over 12 years, took over from his father Azim Premji in 2019. But Premji owns 73% of Wipro and Nadar owns about 61% of HCL. In contrast, Infosys founders own a relatively small 15.16%. Murthy and his family own 4.15%. The stake is small but such is the regard for Murthy that his writ still runs large at the company. He wasn’t even on the board in 2017 when he ousted both Infosys chairman R. Seshasayee and CEO Vishal Sikka.

Murthy commands uncommon respect and loyalty of his colleagues and his employees, as Nandan Nilekani, Infosys chairman, outlined at the event commemorating the 40th anniversary: “Frankly, if he would have said ‘jump off the cliff’ we would have done that; we had that level of loyalty for him.” 

And yet, Murthy’s stake would not have been enough, for the sake of an argument, to keep Rohan at the helm. If the company would have underperformed, after some point, investors would probably have started grumbling. Murthy knows all this well as it was one of these rare circumstances of investor unrest that eventually led to his return in 2013. Infosys’s sub-par and wobbly performance under co-founder S.D. Shibulal made at least one Singapore-based influential investor, Baburaj Pillai, demand from the then board chairman K.V. Kamath to bring back Murthy. Murthy eventually did return, along with his son, cleaned up the dead wood, and oversaw a succession planning that eventually went awry when Sikka abruptly quit in 2017.

Globally, there are many examples of business families that have over generations kept vigil against the boardroom, cushioning corporate managers. As executive chairman, William Clay Ford Jr. still has a significant role in the appointment of the CEO at Ford even though he owns only 0.20% of Ford’s outstanding stock. The great-grandson of Henry Ford still controls Ford Motor.     

Murthy may regret his decision. But Infosys shareholders aren’t complaining. 

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