Major board changes at Infy, signals Murthy

Image: Mallikarjun Katakol for Forbes India

Infosys chairman N R Narayana Murthy has indicated major changes to its board would take place in the next one year as two of its remaining three co founders –  S D Shibulal (CEO and managing director) and S Gopalakrishnan’s (executive vice chairman) – would see their terms end in early 2015.  

Speaking at an investor call with Deutsche Bank on Wednesday, Murthy pointed out that the IT major will get the right replacements without divulging further details of the candidates. According to the company, Shibulal ends his term in March 2015, while Gopalakrishnan’s tenure ends in April 2015.   

“You will see more changes to the board in the next 12 months. We will ensure that there is a suitable person to replace him (Shibulal) as CEO by that date,” he said, noting that the company will fight to regain its ‘original lustre’ despite the management changes over the last few months.   

In the last six months there have been four vacancies on the board including Ashok Vemuri and V Balakrishnan and two other independent members David Boyles and Deepak Satwalekar. The Infosys board, which currently consists of 13 members, including six executive and seven independent directors, recently inducted U B Pravin Rao (president) as a whole-time director and Kiran Mazumdar-Shaw, CMD, Biocon as an independent member to the board. Srinath Batni, board member, who also heads delivery excellence at Infosys ends his term in November 2014. Besides these changes, independent director and eminent economist Omkar Goswami also ends his term by December, 2015.

The retirement age for all executive directors at Infosys is 60 years, while for non-executive and independent directors it is 65 years. However, the IT company increased the age limit for holding chairman's post to 75 years, to re-appoint Murthy at the top position last year.  

Since Murthy’s returned to Infosys last June, there have been at least eight high-profile exits including former CFO and board member V Balakrishnan, Ashok Vemuri who joined iGate as CEO and others like Basab Pradhan, Sudhir Chaturvedi, Stephen Pratt and Subrahmanyam (Subu) Goparaju.

However, Murthy was clear about non-performing employees in the organisation and noted that barring a few exceptions, no one was adding much value despite their compensation and position in the company.

As part of its ongoing restructuring, early this year, the software-services company discontinued its executive council, a forum of senior employees within the firm, which chairman NR Narayana Murthy expanded only few months ago. The IT company also realigned its business portfolios under its two newly appointed presidents, BG Srinivas and UB Pravin Rao who would be reporting to CEO Shibulal, a move widely seen as the start of a two-horse race for the corner office.

Commenting on the performance of the IT-services firm, Murthy pointed out that he is ‘not happy’ with the current growth rate of the company.  During the December-quarter results, the country's second largest IT services exporter, raised its dollar revenue forecast for the current fiscal to 11.5-12% from 9-10% range previously expected. However, it is still lower than Nasscom’s growth projection of 12-14% for FY14.

“We are still slightly lower than industry growth rate. Our operating margin was 29.5% in 2010-11, but it came down to 23.5% at the end of Q3 in the current fiscal. There has been a 6 percentage points drop in our operating margin despite the depreciation in rupee value,” Murthy said during the investor call.