Graph 1: Infosys adds no wealth to family coffer, TCS surges
The news broke that N. R. Narayana Murthy is back as Executive Chairman of Infosys.
Infosys also announced that Rohan Murthy, the 30-year old son of the main co-founder, will be the Executive Assistant to the newly appointed Executive Chairman.
Deflecting any fears that the Infosys founders were going back on a promise they made many years ago that none of their children would have a role in Infosys, Murthy reportedly told a press conference, "He has no leadership role."
Infosys has long claimed it is "driven by values".
Narayan Murthy has been crowned as the king of corporate governance. True, he did not ask for that crown but we, the people, gave it to him. And he chose to wear it.
In a country that is sick and tired of dynastic rule in political parties (the Nehru clan in the Congress, the Pawar clan in NCP, the Karunanidhi clan in DMK) and in businesses (Ambani, Birla, and Tata to name a few), Infosys was a breath of fresh air.
------------------------------- Announcing the Launch of "Equitymaster's Secrets" -------------------------------
After picking out safe high-potential stocks for over 17 years...
We have decided to reveal the complete stock-picking strategy that guides us in picking out our recommendations.
Recommendations... that have given returns like 250%, 105%, 102%, 288% amongst many more.
Yes, it's a rare opportunity to learn the process straight from our research team!
However, our Special Launch Offer could end very soon.
So click here for full details... and act now...
Infosys was an experiment of 4 individuals, not backed by any politician, not supported by any bribe, not built on any illegal transfer of a natural and national resource to a private party at a cheap price.
In a world of the opaque and the corrupt, Infosys was a beacon: It stood for transparency and doing the right thing. What a joy to see something of such tremendous value created during our lifetimes!
But the cracks had begun to appear in the past few years. As I noted in "The GHIT has hit the fan", each of the CEOs of Infosys have been founders. The last two CEO's (Kris Gopalakrishnan and S D Shibulal) may not have been as "qualified" as the first two (Narayana Murthy and Nandan Nilekani) were. This method of succession planning raised a red flag: was it some clear entitlement that every founder must be a CEO? That in a company with 140,000 employees, there was no one else to take over? Or did Infosys never reach out to hire the best and the brightest at senior management levels - because they knew (and the candidates guessed) that the tops lots were reserved for the founders.
"Market cap" wins over "Torch bearer"?
At one level, the decision of Narayana Murthy at the age of 66 years, to head back to the chair can be explained as pure wealth protection. His family owns own about 5% in Infosys. That is worth some Rs 7,000 crore today. The April announcement of lower visibility saw a 20% knock in the share price - a loss of some Rs 1,500 crore for the Murthy family in that one day. That is a lot of erosion of wealth for any family.
Maybe, Murthy and Son are back in there to fix Infosys, to ensure that it is back on the growth trajectory, that it regains its standing as the darling IT stock of the markets. If the one-day price movement of June 3 is anything to go by, then the Murthy and Son act has worked: TCS was down -4% and Infosys was up +4%. Of course, there is still a long way to go to narrow the gap in performance of the businesses and the share price between TCS and Infosys.
Seen from this angle, there is nothing wrong with the Murthy Version 2.0 evolution. But, if this is the case, then the press statement should honestly state this: "Infosys is in trouble, my family wealth is at stake, and my son and I have come to fix it. We will all benefit as shareholders. Meanwhile, I recognise that it violates many of the principles of Infosys, but think of us as benevolent dictators. We have suspended democracy and corporate governance for a while. The two wrongs (of having only founders as CEOs and now having us come in to fix the problems) will make a right."
As the Father-Son duo move into action, the family wealth may be restored.
But at what cost?
Torch bearers have a responsibility, they can never stumble.
They may not have asked to be the mantle of virtuousness but - when placed on such a pedestal - they should deny it. By accepting the crown - even if not asked - they carry with it a responsibility.
Over the past few decades, Infosys - and Murthy in particular - have carried the torch.
On June 1, the runner stumbled.
Every political party will now justify nepotism.
Every corporate chieftain will continue to rule their company in a "baap ka raaj hai" attitude.
And their justification will be: "woh Murthy ne bhi kiya hai".
The proponents of dynastic rule must be celebrating and laughing all the way to their family coffers.
Maybe there was no other choice and Murthy was the only Great White Hope; maybe Rohan Murthy will be confined to being a stenographer, travel agent, and appointment scheduler for a bargain salary of Rs 1 per annum.
Yes, Infosys may gain in share price and market cap.
But this has cost India a tremendous loss of value.
All you wanted to know about the Public Provident Fund (PPF) is right here!
Click Here to view the Free Websummit on PPF & You.
Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)
||Quantum Long Term Equity Fund
||Quantum Gold Fund
(NSE symbol: QGOLDHALF)
|Quantum Liquid Fund
|An investment for the future and an opportunity to profit from the long term economic growth in India
||A hedge against a global financial crisis and an "insurance" for your portfolio
||Cash in hand for any emergency uses but should get better returns than a savings account in a bank
||Keep aside money to meet your expenses for 6 months to 2 years |
Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"