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Breakingviews - Infosys founders get second chance on succession
August 25, 2017 / 2:00 AM / a month ago

Breakingviews - Infosys founders get second chance on succession

President, Chief Executive Officer and Managing Director of Infosys Technologies, Nandan M. Nilekani, speaks to the media at the Infosys campus, in the southern Indian city of Bangalore, January 11, 2007. Infosys Technologies Ltd., India's second-largest software exporter, posted a market beating 51.5 percent rise in quarterly profit helped by a surge in outsourcing, and raised full year earnings forecast. REUTERS/Jagadeesh NV (INDIA) - RTR1L2Q8

MUMBAI (Reuters Breakingviews) - Infosys’ founders are getting a second chance to leave behind a company that won’t crash. Nandan Nilekani will return as non-executive chairman of the $32 billion Indian information technology firm he helped found. That is less than ideal given it was supposed to have shifted to professional management. Still, his appointment in place of two co-chairman streamlines the top ranks and is a fast way to calm investors after its first outside chief executive quit.

After leaving Infosys eight years ago, Nilekani oversaw the rollout of a biometric identity system, which now covers more than 1.1 billion Indians. That has helped New Delhi reduce waste in paying government subsidies. It also forms the backbone of impressive infrastructure that enables instant “know your customer” checks and means Indians can securely send money as simply as an email. He has become India’s most influential voice in the debate about big data and financial technology.

Those impressive credentials mean he should have wide support for an overhaul. Operationally Infosys is not in bad shape, but Nilekani might be able to accelerate the company’s drive to be more innovative or develop a stronger consulting capability like U.S. competitor Accenture. He will have less control over other big external factors, including the availability of U.S. worker visas.

More urgently, the new chairman must draw a line under concerns raised by other founder shareholders relating to past deal making and pay. Nilekani and family, who own 2.3 percent of Infosys, avoided publicly picking sides. Either way, the unusual conduct of the 10-member board in the fallout revealed it is ripe for a shakeup. Four members have resigned as part of Nilekani’s arrival. That is a good start. A next step would be to add to the existing independent director positions so that they represent a majority of directors going forward.

Of course, the real measure of success will be if Nilekani can make himself replaceable by ultimately picking a successor both at the chairman and CEO level who will be able to stay the course, and mark the company’s permanent move away from the grasp of its founding shareholders. 

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