Case 9.

1
Infosys: Leadership Crisis
with Top Management
By
Arun Chandran
Vatsal Gupta
E P Harish
Parthapratim Sarma
Prateek Giria
Raja Ratna Reddy

Timeline of the Case and Case

Update
Profit/Revenue as %age

FY11

FY12

FY13

FY14

FY15

24.85

24.90

23.36

21.26

23.20

N.R.Narayana
Murthy

Stepped down as
executive
chairman in June
2014 after
placing Sikka as
the new CEO
Declined the title
of Chairman
Emeritus as he
wanted to evade
any possible
conflict of
interest

Rohan Murty

Was Narayana
Murthys
executive
assistant
There is a talk of
him opening a
startup in Boston

Vishal Sikka

Infosys

Sikka continued
as a whole-time
director of the
Board, and Chief
Executive Officer
& Managing
Director of
Infosys
Freedom to Vishal
who could now
rebuilt the
organization
according to his
vision.

Infosys
performed better
in FY15 than in
FY14 as its PAT
rose from
Rs.10,656 crore
to Rs.12,372
Its Profit/Revenue
in percentage
increased from
21.26% to
23.20%.

AOL-4
The Theory of Ethical and Moral Leadership
Hollander 1978: While the leader
is the central and the most
important part of the leadership
phenomenon, followers are
important and necessary factors in
the equation

In Infosys the power was

concentrated with the co-founders
for almost 30 years, without
consideration for employee who
have given their life working for
Infosys. This lead to high attrition
rates and underperformance.

Peter Senge 1990: The leader is a

teacher but leadership is not just
about teaching people how to
achieve their vision; rather, it is
about fostering learning, offering
choices, and building consensus
among followers

The Leadership in Infosys failed to

give a proper vision for the followers
about what they would hope to
achieve in future. There were little
choices for people in top
management due to which they
defected to other firms

Peter Senge 1990:

Steward Leadership
The top management
did not recognize that
according to Steward
Leadership the ultimate
purpose of ones work
is others and not self.
Here the CEO position
was limited to few cofounders.

Robert Greenleaf
1997: Servant
Leadership
The CEO was not
chosen not because
they are proven and
trusted as servants
(employees) but
because they were the
co-founder of the
Company.

Moral Impact of Leadership

Transactional and
Transformational
leadership

Transactional approach: Infosys went

wrong in it as they did not reward the
employees with promotions when it was
essential.
Transformational approach: The top
management was selected not on the
merits but if he was a co-founder or not.
Equality is void here

Aristotle: The actions and strategies of

ethical and moral leadership should be
good and noble in themselves, and not
only in their outcomes

Infosys failed in both as the actions were

not noble and even the outcomes failed.

Messick 2004: Three barriers to sound ethical judgment

in situations
Ethical fading: Ethical fading was taking place in Infosys as
the seat of CEO was reserved for a small group of people for
30 years, and favoritism on part of Narayan Murthy shown
to his son Rohan to take up on the top position.
Contextualizing ethics: Here it arose as Vishal Sikka was
brought in from outside when Infosys had a Leadership
Institute. The choice was between two choices neither of
which can be described as right or wrong.
The need for moral courage: Here the situation was of
whistle-blowing where people like V. Balakrishnan resigned
and raised his voice against the unethical practices that
was going on inside Infosys.

AOL 5: Based on the Moral Reasoning Process

of Executive Judgments and Justifications

Ethical theories: Deontology and Distributive Justice

Subjects: Infosys top management and Board

Objects: Employees, shareholders, Government

Properties: Appointment of CEO within the circle of founding members; top management
positions were closed to others.

Events: Narayana Murthy, the former CEO was brought back to turn around the fortunes of
the company. He appointed his son as an executive assistant which was approved by the
Board of Infosys. This event highlighted brazen nepotism while scores of senior managers
were not given their due opportunities to grow and occupy positions in top management.

Moral principles of social justice demands impartiality

Moral Standards: Virtue based ethics focuses on the person who acts

Moral Rules: The concrete application of moral principles and standards

that are violated by the top management is Opportunism

Moral judgments

Opportunism is placing ones own or the groups interest as against the rest.

Top management acted in its own vested interest. When Rohan Murthy was
appointed as executive assistant, there was not dissonance at the Board and was
ratified very easily. Top management and Board colluded to have a control over
Infosys.

High attrition was noticed among employees and senior managers due to lack of
opportunities for growth.

Shareholders interests were compromised by the top management and Board.

Loss to Government due to inefficiency of Board and top management.

Synthesis of findings

It is clear that consensus , collaboration and consideration for the followers was missing in
Infosys

The leader Narayan Murthy and the followers (the managers who left) clearly had different
commitments and means to fulfil them, the reason for high attrition

The worthy employees were not rewarded (Transactional leadership missing) and selection of
leaders were based on founder criteria (Transformational leadership missing)

The morality of Mr. Murthy comes into question when he explicitly promotes his son over
other capable managers.

Steward and servant leadership was violated too

Ethical fading was taking place, became difficult to predict whether contextually ethics are
not being observed, V . Balakrishnan demonstrated moral courage.

The subjects (Infosys Top Management ) have ignored the consideration of the objects
(Shareholders, employees, govt. etc.) in the process of making appointments highlighted by
events like favoring of son by Narayana Murthy and ignoring worthy employees

Social justice demands impartiality which has been ignored

Moral rules violated by means of Opportunism.

Moral Judgment points towards violation of distributive justice as shareholders, government,

employees suffer the outcome for the actions of top management.

Q & A Infosys : Leadership Crisis

with Top Management
1.How was Infosys a failure in corporate leadership, and why?
The failure was clearly reflected in the fact that many senior leaders left in 2012-13 for other organizations and Infosys
performance was lagging behind its competitors. It is the job of the leaders (in this case Narayan Murthy) to retain worthy
people, promote the merit and punish the worthless. There was a clear ignorance of all of the above.
2.To what extent are the founder fraternity and the Board at Infosys to be blamed?
As per the facts stated in the case, the founder fraternity and the Board failed to change the founder-driven model which
was clearly not working as small group of people cannot handle the whole company. Plus Murthy unduly always seem to
promote his own son as the next CEO , and the board failed to communicate its mandate on merit (if at all it had any)
3.Was it also a failure in ethical and moral leadership, and why?
Moral failure, yes Murthy was upholding his own wants and needs of promoting his son than the wants and needs of the
whole organization. Ethical failure too on many accounts, no consensus for many decisions, no collaboration with
employees and other management personnel on issue of selection of different positions.
4.There was a time when Infosys was regarded as one of the best companies to work for. That halo has
gone. Explore what happened at Infosys to account for this mishap.
The failure of leadership of taking Employees welfare and inputs in major decisions led to this. This was apart from
Nepotism followed by Murthy in crediting his sons work and not recognizing other employees efforts which was clear
indication that he wanted the family to stay at the top of the affairs rather than merit.
5.Why, and what do you suggest that can be done to reverse this trend?
Promotions should be made completely transparent, in such decisions more of the employee inputs should be taken, work
recognition should also be made unbiased, and failure should be punished without any bias by having it assessed across
the board and management.
6.How ethical and moral are your suggestions, and why?
Suggestions are as ethical and moral as possible as it would led to collaboration, transparency and accountability across
the organization.

Thank You