Vallabh Bhanshali, the writer of this piece, is Chairman of ENAM Securities.
Walk away I did, but it did not mean a walk over/
Targets hiding behind the non-target/
I prefer speaking to keeping quiet/
When will my countrymen learn to speak up
These are the words that came to mind when I imagined what it must be to be in Mr Narayana Murthy’s shoes…
Omkar, I walked away. Not once. That cannot mean a walk over, allowing a walk over what was built painstakingly.
I spoke up and kept speaking up, not because I am a founder or that along with my wonderful colleagues a part of a large block of voting power. I spoke up because if I noticed something remiss as a shareholder it had to be pointed out for everyone’s good. Those who take criticism and respond positively benefit immensely whereas a critic has little to gain. On the contrary, he is prone to be judged cantankerous as I have been. Worse, in both a tragic and comic manner, my motives have been questioned and I am being dictated to walk away!
All the same, I must speak up. I must choose my words and target thoughtfully. One should be fair and open to the admission of a mistake in doing so. These are some of the principles that I keep in mind and that also went into communication and governance policy at Infosys. In a way, these were some of the pillars that held Infosys aloft.
It is obvious that the corporate governance code at Infosys wasn’t built in a day. Building it required thought, imagination and belief in fairness. The rules of governance were made as a matter of faith in them and not for instant benefits or cover ups. They were built around one simple realization, viz. when multiple constituencies are involved winning and sustaining their trust was paramount and that was possible only by transparency and exercising acute diligence.
It also required that we subjected ourselves to greater questioning, in the immediate term losing business secrets and other limitations. These restrictions did not deter us from writing in the first annual report after we became a public company that “we will always be transparent and we think transparency is a competitive advantage”. Not many people understood the implication of what we said. Over time we were proven right as reflected in the growing confidence of customers, employees and shareholders.
We kept adding layers to transparency. We added the practice of giving half yearly results, quarterly results, audited results, interim balance sheet and so on much before it became law to do so. All based on the same principle that let others judge us based on data and not on certification, self or paid ones.
We did not stop there. We thought even if Indian companies did not practise it or the regulation did not require it, we thought it appropriate to give guidance so that a small investor or broker who did not have the wherewithal to do deep analysis could invest or divest based on it. Of course, our guidance had to be credible, more so in terms of downside protection.
When Sarbanes Oxley code was introduced in the US demanding that the listed companies come clean and a window of the period was provided for the same we would become the first company to file ‘No change in disclosure’ statement. It was a proud moment for us and for India.
A lot of these facts are well known or are a part of Infosys legend but I felt compelled to mention by way of background to what I have to say.
I thought it was patent that constant comments and questioning of governance based on public data or on a whistleblower’s report, were targeted at the Board or its leadership. These questions cannot be targeted at the CEO. They were always targeted at the Board and or its leadership. The CEO has to be enterprising and in that process, can make a mistake. It is and was the Board’s job to keep him both motivated and discreet. The Board has to lay and enforce its guidelines in a dynamic manner.
Roosevelt said in the context of democracy ‘that it is only when the government is afraid of the people and not the other way around that democracy can be said to be successful’. The words could not fit better to a board managed company. The CEO must be bold but not so bold that he dictates the board and lays the rules of governance. It is the board that should not let that happen.
Unfortunately, this is what seems to have happened at Infosys. Amongst numerous examples of this let me take just one.
In 2016 the CEO announced goals for 2020, rather abruptly, which were ambitious by all accounts and naturally, had to be abandoned. It is strange that the while the Board has raised a finger at my motives it completely failed to question the motive or the meat of that abrupt move. What lay along that garden path and where was it leading to, should have been the most natural questions. It didn’t need great professional skepticism but the Board simply let that happen. In retrospect, everyone can see why was that announced made and what lay along that path. Equally facile and naive was the Board’s announcement of abandonment of those goals! Slightest questioning would have avoided the great embarrassment to the company, a company that met or came close to its guidance for a number of years. When track record of this kind was being trampled on, at least to the discerning, it became clear that grave weaknesses were being institutionalized.
Infosys came back from crises in 2001 and 2008 strongly because there was a sense of trust and fairness in warp and weft of the company and the crisis galvanized them into both unity and strength. Companies with weak governance and unfair practices find it difficult to survive crisis. A dam that cannot hold a flood back is a bigger curse than the flood itself. Its test lies only when a flood arises.
If I could clearly see that eventuality I had a choice to keep quiet. I could persuade myself that I had walked out voluntarily and I should treat Infosys as a closed chapter bearing its progress and distress with equanimity. It was easy but that is not me. I knew I could be misunderstood as wanting to come back or impose my nominee as the CEO. What a travesty! Someone who walked out no sooner a CEO was found with billions of dollars in the company would not do so to come back at the drop of a hat! I am old, have my own tragedies but sane enough.
I have pondered on the accusations being made against me for forcing Vishal to resign. It is a lie. It is the Board, rather its leadership that did it. The Board failed to enforce good practices and went around seeking endorsement from paid agencies instead of dealing in data and letting the world judge for itself. That is all that I demanded. It was the Infosys practice and at least some of the current directors have been party to such situations and disclosures. But that was not to be. Its attempts to strengthen itself ended in a ludicrous situation of having multiple people holding posts with the suffix chairman!
The need for a large company to have a strong CEO is unquestioned. But good governance, the fountainhead of a company, and a workforce motivated and comforted by a pervasive sense of fairness are even more important. If the board governance improves I have no doubt that the deep-rooted culture and competence of Infosys will restore its glory.
The public reactions are not lost on me. They anguish me. Not because the market capitalization has gone down. It is not the affronts to me. It is much worse. It is the deep-rooted culture of bearing what is not right, particularly in India, that is the sore point. Democracy, a company or for that matter any relationship can become and remain strong only when people have the courage to speak up. Speak up in a fair and persistent manner. Those who prefer to suffer losses than speak up are destined to do so.
At my age, I don’t know how long I will be able to speak up. My misfortune that I will die without seeing Indians having learnt to speak up. Financial fortunes vanish like the privy purses of the kings when you don’t have the wherewithal to protest and protest in time.
I have restrained myself in my statement by stating the obvious to but that may have been lost to the less clued in. Lost in the din of falling share price and the statements by those hiding behind Vishal who portrayed himself to be my victim. He was never my target.
This article was first published on ET.