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Why the Murthys deserve a chance

india Updated: Jun 10, 2013 03:23 IST
N Madhavan
N Madhavan
Hindustan Times
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An iconic leader is pulled out of retirement to lead a company of 156,000 bright minds, in the middle of its most challenging times yet. Tongues wag when he pulls his reluctant son in to assist him.

The events at Infosys with the return of NR Narayana Murthy as executive chairman and his son Rohan Murty as executive assistant is a test case of corporate governance. Critics say Rohan’s induction will discourage talented employees from rising in the organisation.

But Infosys shares jumped 9% on new of Murthy’s return.

Let us get a few things clear. Infosys is a private company, not a public institution. If sha­re­holders and customers are not worried, neither should we.

However, employees are a tricky issue. In an industry where the old saying goes “Our assets go home in the evening” employee retention and attrition are critical issues. The best course for Narayana Murthy is to organise a third-party survey of its employees (it is common practice in professionally managed companies, and I have taken part in such) and publicise the findings.

The irony of Infosys is that all the CEOs so far have been from among the founders. While all of them are competent, in effect, Infosys functioned like a family-run company despite its loud talk of meritocracy.

The irony is compounded when the supposedly dynastic entry of Rohan Murty in effect has the hallmark of a meritocracy. With a PhD in computer science and credentials from Cornell and Harvard universities, the young Murty is eminently qualified to be an executive assistant to his father.

The problem, however, is in the “deterrent” effect that may dissuade high-flying managers and bright young minds from seeing a long-term future for themselves at Infosys.

A key point is that promoters hold only 16% of Infosys shares. Foreign institutional investors hold 37% and insurance companies 13%. The remaining stakes are dispersed. Such a pattern clearly cannot encourage simple dynastic succession. The Murthys deserve a chance under such vigilance. And yes, an employee survey will help.