Tech

Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.

Vishal Sikka's resignation as chief executive officer of Infosys Ltd. is part of a much-needed cultural reboot at the Indian software exporter. But the process won't be complete as long as the current board hangs around to sing dirges of victimhood.

Shares of Bangalore-based Infosys fell as much as 7.6 percent Friday, reversing the previous session's buyback-related euphoria. Investors are right to be nervous, because leadership has been the company's Achilles' heel for the better part of the current decade.

Buyback Bounce, Exit Blues
Infosys shares fell 7 percent in Mumbai in Friday morning trading after CEO Vishal Sikka resigned; they'd risen 4.7 percent Thursday on news of a buyback
Source: Bloomberg
***Intraday times are displayed in ET.

The board didn't cover itself in glory, though, when it used the press release announcing the CEO's departure to launch a veiled counterattack on the (retired) founders, who continue to own 13 percent of the stock. For example:

The Board understands and acknowledges Dr. Sikka’s reasons for resignation, and regrets his decision. In particular, the Board is profoundly distressed by the unfounded personal attacks on the members of our management team that were made in the anonymous letters and have surfaced in recent months. As the Board has previously stated, 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.

This "Grinch-stole-our-CEO" narrative doesn't wash. If the board had simply made a point-by-point rebuttal of a whistle-blower's detailed allegations of impropriety in a $200 million acquisition of Israeli automation-tech specialist Panaya Ltd. in 2015, it would have been relatively easy to shift the blame to N.R. Narayana Murthy. He is the cofounder who whipped up that "continuous drumbeat of distractions and negativity" that Sikka alluded to in his resignation letter.

What Sikka Left Unfinished
Infosys revenue growth has slipped below that of Accenture, underscoring the challenges Indian software exporters face in trying to embrace digital technologies
Source: Bloomberg

By being miserly with disclosure, the board has allowed the scandal to fester. Gadfly said Thursday that either the culture at Infosys, once admired as India's most transparent company, gets a reboot, or investors should give the board the boot. It now appears that one course may depend on the other. That's because a second press release from Infosys, holding the 70-year-old Murthy responsible for the mess, makes any compromise impossible.

One way for Infosys to restore credibility quickly is to bring Nandan Nilekani -- the cofounder who ran Infosys after Murthy, and has stayed away from the fight -- back at the top of an entirely new board. With Ctrl-Alt already pressed, investors should watch for large blocks of shares changing hands. They might give a hint of whether the Infosys old guard is acquiring enough voting power to hit Del.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Andy Mukherjee in Hong Kong at amukherjee@bloomberg.net

To contact the editor responsible for this story:
Paul Sillitoe at psillitoe@bloomberg.net