The ‘bullied board’ offers no reassurance that it will stand up for a new CEO

For Infosys, a new chief executive is not the answer. Vishal Sikka delivered outsize returns in three years at the helm of India’s second largest outsourcer by market value. No wonder that the resignation of the company’s first professional CEO amid an ugly spat with founder shareholders prompted a roughly 9% plunge in the share price.

CEO departure

When a bad CEO quits, a company’s share price normally rallies. Not so here, hence the destruction of $3 billion-plus of market value. Infosys investors have lost a leader who delivered total returns up to 15 percentage points above rivals Tata Consultancy Services and Wipro.

The manner of his departure suggests the board is not in control. It said it regretted Mr. Sikka’s decision and was “profoundly distressed by unfounded personal attacks on members of our management” on everything from deals to pay.

Indeed, it is a founders’ coup. One, Narayana Murthy, owns less than 1% and has no formal position. He has been a vocal critic. Others have opposed Mr. Sikka through conventional means.

Together, Infosys’ founders possess barely 13% of the company. Most of them last year abstained from voting to keep Mr. Sikka following an increase in his compensation that was tied to performance and, therefore, aligned with shareholder interests. In April, founders forced the board into appointing a co-chairman, which confused the chain of command.

To be sure, Mr. Sikka was not perfect and Infosys changed under his leadership. The old guard was conservative. In contrast, Mr. Sikka set a too-lofty goal to achieve revenues of $20 billion by 2020. A decision not to publish an independent investigation into a $200 million acquisition following whistleblower allegations was also less than ideal. But Mr. Sikka’s decision leaves a void while the industry is going through a structural transformation, including a crackdown on vital worker visas to the U.S.

A high-calibre international professional will not want to dive in knowing the perils of pushing change. Bringing back one of the company’s founders would be a step backwards. And the bullied board offers no reassurance that it will stand up for whoever is chosen. That leaves shareholders high and dry.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)