Under pressure, Infosys recalls Murthy as Chairman

Reuters: IT services firm Infosys Ltd., grappling with a string of disappointing results and loss of market share, has recalled founder and former chairman N.R. Narayana Murthy to act as executive chairman for five years.

He replaces current chairman K.V. Kamath, who will become lead independent director, effective 1 June. The current executive co-chairman S. Gopalakrishnan will be re-designated executive vice chairman, while current chief executive officer S.D. Shibulal will remain in his position, Infosys said in a statement on Saturday.

“The board has taken this step keeping in mind the challenges that the technology industry and the company faces,” Kamath said in the statement, also acknowledging calls from shareholders to strengthen executive leadership of the company. Infosys said it will put the matter before shareholders at its annual general meeting on 15 June.

The company, for years an investor favourite for exceeding its earnings targets, has struggled in the past two years as its big customers in the US and Europe cut costs and seen rivals such as Tata Consultancy Services and HCL Technologies take away market share.

In April, Infosys forecast full-year sales growth that missed analyst expectations by a margin of up to 50%, pushing down its shares to their lowest close in a decade.

“This is a drastic, some might say, welcome move,” Ambit Capital sector analyst Ankur Rudra said, which has a ‘sell’ rating on the stock. “Probably, this could be a step towards a new strategic direction and leadership as well.”

The company’s troubles have spurred criticism of everything from its method of choosing CEOs to its pricing strategy to what is seen as an insular and risk-averse culture. Chief executive Shibulal is one of the seven engineers who launched the company in 1981 by pooling together US$ 250. All four CEO’s so far have been from this group.

Murthy, who has earlier served on the board of HSBC and Unilever, said the calling was ‘sudden, unexpected and most unusual’, while accepting the position. He also requested the Infosys board to appoint his son Rohan Murthy as his executive assistant for a period of five years.

Shares in Infosys closed 3% higher on Friday, ahead of the announcement. The stock is up 4% so far in 2013, compared to a nearly 7% increase in the sectoral index.