Vishal Sikka’s exit again shows India is not a country for outsider CEOs

By Aarushi Singh

In less than a year, two of India’s largest companies have experienced a similar situation and demonstrated that there’s no place for outsider CEOs in Indian companies.

Last October, Tata Sons replaced Cyrus P Mistry as chairman of Tata Sons. His sudden removal, at a board meeting, took most Tata observers by surprise though the disagreements between him and Ratan Tata must have been growing for some time. Though Ratan Tata appointed Mistry as his successor in 2012, but he still wielded a very significant influence over Tata Sons. Reasons behind his removal were restructuring of the management .i.e. bringing new faces at senior levels which led to conflicts, Ratan Tata felt Mistry may not be the best bet for the group in the long-term and that there was hardly any  forward movement under his leadership and last was the difference of opinions with the board and the founders.

And in August, again a similar situation happened in one of India’s best IT company, Infosys i.e. the resignation of Vishal Sikka in response to the continuous allegations he was facing from the last four-five quarters.

One of the main reason behind these allegation was the concern of promoters regarding the deteriorating governance and values of the company, followed by other reasons which include, Sikka's salary: A sharp increase in Sikka's compensation early last year is said to be the biggest flash-point. The company says Sikka's cash compensation had actually gone down and the increase has been primarily in RSUs (restricted stock units) and stock options, which are directly linked to incredibly steep goals.

Second was the Appointment of Punita Sinha, wife of Jayant Sinha who is Minister of State for Finance, was appointed an independent director last year. The appointment raised concerns with founders but the board says she is qualified for the job.

Third, Growth through acquisitions: Sikka has maintained that Indian IT's older businesses of application development & maintenance, infrastructure management and BPO are slowing and the margins are falling .But sources said that some of the founders are not in favour of acquisition-based business model.

And last was the rift between the board and founders over investigations into several decisions made by the company. As Narayana Murthy demanded to make the investigation reports public.

These conflicts between the preceders  and the successors have affected the financial position of the company. Infosys shares touched a three-year low after this step of Sikka which is a severe dent to brand reputation ,client conversation, investor confidence, employee morale and business transformation which will affect the company’s performance in short and long run. But the appointment of Nandan Nilekani as non-executive chairman on Thursday, has been the most dramatic comebacks in recent corporate history, marks the second instance of a retired co-founder being handed the reins to take out the corporation from this unexpected crisis. And the results of Nilekani’s return are evident as Infosys shares have gone up over 2%.