It was not just a change of guard, but the change of an era at Infosys Technologies, India’s second largest software exporter. In one of the biggest changes since its inception in 1981, Infosys today announced K V Kamath, one of the independent directors of the company, as the new chairman. The 64-year-old banker, now non-executive chairman of India’s second-largest lender ICICI Bank, will replace N R Narayana Murthy, who founded the company with six others.
Kamath will take over from Murthy on August 21, 2011.
The nominations committee, headed by Professor Jeffrey S Lehman, and the board also approved the appointment of S Gopalakrishnan as executive co-chairman. S D Shibulal, one of the co-founders and chief operating officer, was appointed as the chief executive and managing director (CEO & MD) with effect from August 21.
“I am thankful to the nominations committee. I am glad they have found a perfect team to strengthen customer, investor and employee connect on one hand; and world-class board governance on the other. Vaman (K V Kamath) is, in my opinion, one of the finest corporate leaders of modern India. Kris (Gopalakrishnan) has demonstrated high-class performance during testing times for the industry and the company. I congratulate Shibu on being appointed the CEO and MD. I have no doubt he will do an excellent job like Kris did,” said Murthy during a press conference in Bangalore.
Murthy will retire in August 2011, after reaching 65, the age the company has set for the founders to retire at from non-executive roles in the board. But Brand Murthy is not going to go away from Infosys along with his retirement. The company’s board has decided to make Murthy the chairman emeritus for life, even though he has made it clear that he will not want to spend more time in the company. “However, the board, the executive members and every Infoscion has every right to demand my time,” Murthy said.
Lehman said, with the appointment of Kamath as chairman, the company followed the international practice of separating the board leadership from the management. “Kamath emerged as the clear choice because of his experience and expertise in corporate governance that Infosys needs right now.”
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The board will also announce the appointment of three more board members from within the company. According to sources, in all probability, these three employees will be V Balakrishnan, CFO; Ashok Vemuri, global head, banking and capital markets, and strategic global sourcing; and B G Srinivas, senior vice president, manufacturing, product engineering, product lifecycle and engineering solutions.
Industry watchers feel, these appointments will make sure that when Murthy steps down in August, the transition will be smooth. Kamath said: “I have known Murthy for over 41 years. No one can replace him. Rather, I have been mentored by Murthy for the last 15-16 years. I feel greatly honoured to have been asked to be the chairman of Infosys by the board of directors and accept this responsibility with a deep sense of humility.”
Meanwhile, bringing to an end to the prevalent practice, Infosys board has decided to increase the retirement age of the chairman from 65 to 70. This, however, will not be applicable for the co-founders. Lehman said the change had been made to attract the best candidates from outside for the role of chairman.
The retirement age for all executive roles will continue to be 60. This means, Kris Gopalakrishnan, who will become the executive co-chairman of the company from August 21, 2011, will be left with just three years to continue in his role. Same will be the case with Shibulal. They may, however, continue to be on the company’s board in non-executive roles as independent directors.
The board has also approved the proposal for change of name of the company to Infosys Limited from Infosys Technologies Limited. The company intends to seek shareholders' approval on it at the annual general meeting on June 11, 2011.
LEGAL ISSUES
Meanwhile, legal experts said, according to the Companies Act, chairman is defined as a chairman of the board or board meetings. It is just a nomenclature and is a statutory position. The chairman convenes, moderates and finalises the minutes of the board meeting. So, an individual can be the chairman in more than one company. In case there is a conflict of interest among these companies, it has to be disclosed. In matters where there are direct or indirect interests, the chairman also cannot vote. However, as per the Companies Act, an individual can be the MD in just two companies.
INDUSTRYSPEAK
Infosys’ decision to appoint Kamath as its chairman has been on expected lines, said market analysts and industry experts. Considering the role of Kamath and S Gopalakrishnan as executive co-chairmen has been clearly earmarked, many feel it is work as usual at the Bangalore-based $6-billion company.
“I think Kamath is a phenomenal guy, but his taking over as chairman of the company does not mean any big change. It gives a message of continuity. What matters now is how Shibulal will steer the company. Infosys needs a dose of growth that will bring it back from the trouble it has been in recently,” said Ganesh Natarajan, Vice-Chairman and Managing Director of Zensar Technologies.
Atul Nishar, Founder and Chairman of Hexaware Technologies, felt this would better prepare Infosys for its future. “I think they have a founder who is the executive co-chairman so the continuity is taken care of. Also, Kamath is an institution in himself. So, this will help. Moreover, the fact that the process was so transparent just validates the principles the company stands for.”
Market analysts felt the company had taken the middle path by getting an insider and an outsider at the helm of the company. “If they would have just announced Kamath’s name then they would have been criticised about how a person with no IT background could be at the helm. On the other hand, if Kris would have been named chairman then the company would have been criticised as being too conservative. So, this seems to be a better policy,” said an analyst from a leading brokerage firm.
But many analysts pointed out that the rejig was not as important as what was happening within the company. “We would like the company to get over with its re-structuring fast and focus on operations. I think this is impacting the business growth. But, it seems that the company is yet to get its act together in terms of vertical heads and other functions. The more time they take in stabilising the more they will lose out to competition,” said an analyst, advising clients on outsouricng policy, on condition of anonymity.
Infosys today also announced that it has changed its organisational structure. The company will focus on four large verticals and have seven services lines. The services offering will have three main focus areas: business transformation, business operations and business innovation.