Much ado about Murthy

Elections are around the corner and there is intense speculation about who all will figure in ‘Team Rahul’, or which faces will be missing from ‘Team Modi’. There is one thing noticeably missing in all the chatter, though – no one is questioning the right of either the leader of the Congress Party’s election campaign, Rahul Gandhi, or the Opposition poll campaign leader Narendra Modi’s right to choose who will figure in their team – and who will not.

After all, the two have been clearly assigned the task of leading their respective parties to victory in the next elections, and everybody has implicitly granted their right to pick whom they will to assist them in this task.

Contrast this with the trenchant criticism meted out to Infosys’ returning chairman N.R. Narayana Murthy’s decision to induct his son into the core team he is setting up in Infosys to assist him. After all, one could argue that he too had been clearly picked by his organisation – Murthy was asked to return from retirement to try and stop the downslide in the company’s fortunes and prospects over the past few years. What’s more, Murthy has been given a clear timeframe as well –five years – to pull this off.

CEO’S PREROGATIVE

It is natural, then, that Murthy will try and put together the team which he thinks can assist him best in this task. This is not unusual. CEOs do this routinely everywhere. Reams have been written in management journals about the art and craft of creating such winning teams. And nowhere is the CEO’s absolute right to assemble the team of his choice even remotely questioned.

Whenever there is a top level change in any organisation, unless it is part of a very gradual and long term succession plan, wholesale changes are fairly routine. In fact, there is even school of management thought which believes that ‘management by bloodbath’ is the best way to keep a company alert, competitive and hungry for success! Why, then, should Murthy be pilloried for doing what any CEO not only does, but is almost automatically expected to do?

The answer of course, is that the criticism is not against his picking a team, but who he is putting in it – his son, Rohan Murty (he has dropped the ‘H’).

Murthy’s move has been pilloried as smacking of nepotism, as being against the best principles of corporate governance, and even as being against the interests of Infosys itself, and its shareholders. Shriram Subramanian, managing director of InGovern, a proxy advisory services firm and a former Infosys staffer, even said that by doing so, Murthy was breeding a “culture of servility” in the company and creating “yes men” who will simply pay obeisance to the chairman.

Well, here is a bit of news for Subramanian: Giving unquestioned obedience to the leader is pretty much the standard operating system in India Inc. And this kind of blind acceptance is not restricted just to the employees (which is understandable, since their future and their personal fate is controlled by that leader), but by shareholders, workers and creditors and even that company’s customers – the key stakeholders for any business.

In fact, the only surprising bit about the entire affair is the amount of heat Murthy has managed to attract. Does anybody remember worker unions protesting when Kumar Mangalam Birla was inducted to run his father’s business empire?

Where were the shareholder protests when Ratan Tata was put in charge of the Tata legacy? Did lenders and institutional shareholders – the two biggest classes of stakeholders in the then undivided Reliance Industries -- raise a murmur when the late Dhirubai Ambani put his two sons on the board?

Nobody raised questions on whether these gentlemen deserved to be placed where they had been. At the time of induction, for instance, Ratan Tata was an architect, Anand Mahindra had studied film, Kumar Birla was studying and the brothers Ambani had standard issue degrees.

It is an entirely different matter that they later emerged as India’s top business leaders in their own right, running their own, globally competitive businesses and indeed, serve as role models for other aspiring business leaders. The point is, at the time they were on-boarded, their suitability for the role could have been legitimately questioned – but wasn’t.

FEUDAL MINDSET

It could be argued that Murthy himself holds a very small stake in Infosys now, hence he does not have the right to behave in exactly the same fashion as his peers in other places. But then, the same can be said for many listed companies in India today.

In fact, when Ratan Tata assumed control of the Tata Group, Tata Sons, the holding company, held only minority stakes in many of its companies, something which has been corrected over time. There are innumerable instances where the promoter– who often behaves as the sole proprietor – has only a minority stake in ‘his’ company.

Even if he holds a majority stake on paper, the reality is that a bulk of the shareholding – over 98 per cent in many cases – is pledged as collateral against loans, or has some other lien on it which effectively limits what the nominal holder of the share can do.

The real issue here is really the feudal mindset which continues to persist our society. Whether it is politics or business or even entertainment, we tend to grant automatic ‘inheritance’ rights, without bothering to question whether such rights deserve to be granted in the first place.

We do not question when politicians induct their children into their ‘democratic’ parties in positions of power. We stand up and cheer when businessmen hand over the baton to their sons and daughters.

Star sons and daughters get an automatic ‘bye’ into top league without being put to the trouble of climbing the ladder. Why then, complain when Rohan Murty is given a leg up? Is it because his father had no such ‘inheritance’ rights? That he was a first generation entrepreneur, not a maalik (master) by birth?

This is not to say that the issues of corporate governance, or potential conflicts of interest which critics of Murthy’s move have raised are not relevant, or do not deserve to be raised. They do – but they need to be raised in every such instance, not just in this one. Perhaps then, Murthy can be beaten with the corporate governance stick.

Perhaps the real reason is that till such time as Murthy started making a noise about it, and worse, setting an example, India Inc had pretended that something called corporate governance did not exist.

(Response to raghavan.s@thehindu.co.in )

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