N R Narayana Murthy

Economic Times: Blog, June 3, 2013


Murthy is back, but did he ever leave?

Sridharan Ramakrishnan   
Monday June 03, 2013, 04:06 PM' v:shapes="_x0000_i1025">

"Infosys is my middle child," said N. R. Narayana Murthy, as his software company dramatically announced that its co-founder was coming back as the executive chairman. For almost all promoters, letting go of companies they have founded is extremely difficult. And if it happens to be a company that has fired the imagination of an entire generation of Indians, and become the de facto gold standard in corporate governance in India Inc. and its flag-bearer abroad, then walking away from it can be virtually impossible.

That's perhaps why Murthy never really left Infosys, despite him saying that "this calling was sudden, unexpected, and most unusual". Yes, Murthy did give up executive responsibilities back in 2006, but he continued as Chairman until August 2011, when he brought in K V Kamath as his replacement. But through that time his shadow always hovered over the Infy headquarters in Bangalore, where he also maintained an office. He was always available to any Infoscion who wished to meet him, and especially to the senior leadership team. In fact, it's reasonable to say that no key decisions could have been taken at Infy without Murthy's consent. After all, besides being its larger-than-life (co-)founder, he and his family are the single-largest individual shareholders even today.

The choice of Kamath was unusual to say the least. Kamath without doubt is a great banker, but to put him at the top of an IT services company, especially at a time when it is going through the worst phase in its history, was unfair to him. Maybe it wasn't anyone's intention to set him up for failure, but that's how it has ended up being. Along with Kamath's appointment as Chairman came Kris Gopalakrishnan's elevation as executive co-Chairman, an admission of the fact that Kamath needed a strong operations partner. But now that Murthy is the Chairman, Kris has been demoted to the post of Vice Chairman. In other words, Kris was good enough to be Kamath's co-chair, but not Murthy's. Kamath himself has been reduced to an independent director. So, the question is, why didn't Kamath simply quit the board? My sense is out of two things: one, sheer respect for Murthy and, two, to not rock the boat when there's already a lot turbulence. But don't be surprised if he does leave the board for whatever reason within a year.

By deciding to return to the saddle Murthy is taking a bigger gamble than the Infosys board. The challenges are both personal and professional. Personally, he's attempting a turnaround when neither age nor the industry tide is in his favour. Not just has the business environment become difficult, but also the immigration policy in the US has turned hostile. There is no one-way gravy train to ride. When the going was good, Infosys could say no to projects that did not protect its healthy profit margins. Now, with projects drying up, every deal must be fought tooth and nail, and profit margin is more often than not is the casualty. The only help at the moment is coming from a weak rupee.

Another reason why Murthy's second act is going to be challenging is that he has brought on board his son Rohan Murthy as his executive assistant. Now, Murthy has been quick to clarify that Rohan must not aspire for a leadership position at Infosys. But by inducting him—also a shareholder of Infosys--into the executive chairman's office, Murthy has made sure Rohan will have a far greater say in strategy than an ordinary EA would.  Therefore, Murthy must succeed also because his son's future at Infy is at stake. A successful second innings by Murthy will cement Rohan's chances of becoming the CEO, partly because a significant share of the credit for a turnaround will be laid at his feet. As I see it, it will be hard for the Infosys board to convince any big, global CEO to succeed S D Shibulal once his term ends in 2015. The reason is simple: with Murthy calling the shots, Infy doesn't need an independent-minded CEO. So, in all probability, Shibulal's successor will come from within the company and be V Balakrishnan, B G Srinivas, or Ashok Vemuri. None of them will likely object if they were asked by Murthy or the board to vacate the CEO's chair for Rohan in 2018, when Murthy's five-year appointment comes to an end.

If all goes well, by 2018, Murthy will probably have had the pleasure of rescuing his middle child, and putting it in the care of his second.


Online comments posted on June 3, 2013:

June 03,2013 at 08:55 PM IST
1 Follower
Bronze: 136
Well argued article with a conclusion which goes well with the trend. Five years could be a ‘long period’ in the present scenario. Coming months will bring more clarity, as the Murthys will be deciding whether or not to call back Ex-Infosyans whom the company has deployed elsewhere for convenience. People like Nandan Nilekani and Pai. Some of them have already indicated that they are available. May be they may expect salaries higher than those now payable to NR Narayana Murthy and son Rohan Murty



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