The Return Of Mr Murthy

A lot of the disappointment voiced about Mr N.R. Narayana Murthy’s return to Infosys has to do with the fact that people had put him on a pedestal and expected him to be almost super-human in all respects. And by returning, son in tow, he proved that he is as human as anyone. All the corporate governance principles he preached in his first stint in the company were quietly junked. A compliant board tamely increased the retirement age to accommodate Narayana Murthy and while doing that, also changed the rule about involving family members of founders. In his original stint, for instance, Mr Murthy had made a great deal about how Infosys discourages children and relatives of the founders from treating the company as a family business.

Mr Murthy has justified his return by saying Infosys is, after all, his middle child. He also says that he returned because he was worried about his legacy. And finally, he has reiterated that his son Rohan Murty is not aspiring for a leadership role in Infosys. To a certain extent, Mr Murthy’s return can be justified. He had left Infosys in reasonable shape just about two years ago — and he had never expected it to go downhill so fast, despite having practically dictated the succession plan when he retired. Then there are the small material issues — a significant portion of his personal wealth is tied to the 4.7 per cent stock he holds in the company. If the stock underperforms, it will directly affect his wealth. Even for a person who does not live a flamboyant lifestyle, the loss of hard-earned wealth is difficult to stomach. And remember that Mr Murthy has really sweated blood to build Infosys. Sure, he had set certain rules about corporate governance when he was building the company — and it is far easier to stick to the straight and narrow path when the company is doing well, than when it is being beaten by peers and other rivals.

In the short run, I would expect that Infosys’ fortunes to improve because of Mr Murthy’s return. For one, nobody can dispute that he will provide better leadership than either Mr Kris Gopalakrishnan or Mr S.D. Shibulal. For another, as the man who set the foundations of the old Infosys, he is best placed to also dismantle the old strategic and operational model and bring in a new one. If Mr Murthy throws his weight behind a new path for Infosys, few will question his right to do so. The handicap that both Mr Shibulal and Mr Gopalakrishnan faced was that they could not tamper too much with Mr Murthy’s legacy.

The problem is that it will take some time to figure out whether Mr Murthy can effectively handle the new marketplace realities as well he did when he was originally in the saddle. The conditions under which Infosys is operating today are very different from the era in which Mr Murthy built up the company. He may be equally successful this time around — or he may not. If he is not, Infosys will have lost quite a bit of ground and time by the time he retires again. Mr Murthy also needs to understand that while Infosys is his middle child, it is an adult and fast approaching middle age. As the parent, he needs to let the child make its own mistakes and live its own life.

While it is easy to understand and even sympathise with Mr Murthy’s motivations for coming back, it is less easy to appreciate the role the board has played. At the age of 67, Mr Murthy can be forgiven for wanting one more shot at rejuvenating Infosys — and also for bringing his son into the company to help him out. The more important question is that did the board really try very hard to find a different solution that would not involve bringing Mr Murthy back when it became apparent that Mr Shibulal could not bring about change in Infosys quickly? Apart from the management members, the Infosys board has quite a few brand-name independent directors. Before Mr Murthy came back, the non-executive chairman was Mr K.V. Kamath, who now has become the lead independent director. The issue that is not clear is whether Mr Kamath and the other independent directors on the board of Infosys tried to look for leaders — both from within the company as well as outside talent — who could pull Infosys out of trouble. Indeed, Mr Murthy could have been co-opted to help in finding a new CEO.

The point is, it seems that the board took the easy way out. Mr Murthy wanting to return is understandable. The board seeing him as the only option is less easy to comprehend. (A caveat: I don't know if the board seriously looked for options beyond Mr Murthy).

One final point about Mr Rohan Murty, Mr Narayana Murthy’s son. He does seem to have good credentials for any company to hire — he holds a doctorate in computer sciences and is a junior fellow at Harvard. But he obviously did not feel that his current career goals would be hurt by taking a sabbatical to help out his father. At the same age, I doubt whether Mr Murthy would have made a similar choice.

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