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Infosys CEO Pens Shocking Resignation Letter, Blasts 'Continuous Drumbeat Of Distractions' From Company Founder
Infosys CEO Vishal Sikka resigned unexpectedly Friday, penning a three-page letter that alludes to a long-running feud with the Indian IT outsourcing company's founder.
"Over the last many months and quarters, we have all been besieged by false, baseless, malicious and increasingly personal attacks," Sikka, who joined Infosys three years ago after serving as SAP's CTO, wrote in the letter. "The continuous drumbeat of distractions and negativity over the last several months/quarters inhibits our ability to make positive change and stay focused on value creation."
The shocking departure worried the investment community, which sent Infosys' stock down $1.44 (9.04%) to $14.49, the company's lowest trading price since April.
[RELATED: President Trump Set To Sign H-1B Executive Order, Tata, Infosys, Cognizant In Crosshairs]
Infosys COO U.B. Pravin Rao was named as interim managing director and CEO of the Bengaluru, India-based systems integrator. Rao will report to Sikka, who will serve as executive vice chairman until a permanent CEO takes office, which Infosys said is expected to happen no later than March 31, 2018.
"I cannot carry out my job as CEO and continue to create value, while also constantly defending against unrelenting, baseless/malicious and increasingly personal attacks," Sikka wrote in a letter to Infosys employees, which he shared in a blog Thursday. "After much contemplation, I have decided to leave because the distractions, the very public noise around us, have created an untenable atmosphere."
The company's board backed Sikka and deflected criticisms made by company founder and former chairman NR Narayana Murthy, who claimed in recent emails that Infosys' independent directors felt that Sikka was more CTO material than CEO material.
"The Board is profoundly distressed by the unfounded personal attacks on the members of our management team that were made in the anonymous letters," Infosys said in a statement. "The Board denounced the critics who have amplified and sought to further promote demonstrably false allegations, which have harmed employee morale and contributed to the loss of the company's valued CEO."
Murthy fired back several hours later, noting that he voluntarily left Infosys' board in 2014 and was not seeking any money, power or positions for his children. Murthy has in the past questioned pay raises granted to Sikka and Rao, as well as the size of severance payments given to others.
"I am extremely anguished by the allegations, tone and tenor of the statement," Murthy said in his response. "My concern primarily was the deteriorating standard of corporate governance, which I have repeatedly brought to the notice of the Infosys board."
Infosys under Sikka set a goal of hitting $20 billion in revenue by 2020, but the $10.2 billion solution provider would be hard-pressed to reach that goal given that the company gave revenue growth guidance of just 6.1 percent to 8.1 percent for the current fiscal year.
Some of Infosys' recent investments haven't panned out as expected: The company's retail and consumer products goods businesses remained mired at 15 percent of total revenue despite the acquisition of e-commerce platform Skava two years ago, Boz Hristov, a senior analyst covering professional services for Technology Business Research (TBR), wrote in April.
Historically, Infosys has invested more heavily in startups, but Hristov said those bets have yet to move the needle much. Hristov said that Infosys would need to buy a large consultancy that's really strong in specific verticals or geographies to regain the market position it enjoyed five or ten years ago.
More recently, Infosys has gotten mired in the Trump Administration's criticism of the H-1B visa program. An executive order in April from President Donald Trump will shift the skilled worker visa program away from a lottery system weighted toward lowest-wage workers to a system that prioritizes higher-skilled, higher paid workers.
"Companies like Tata, Infosys, Cognizant will apply for a very large number of [H-1B] visas … by putting extra tickets in the lottery raffle," a Trump administration official said in April. "You have contracting firms that are not skills employers, that often times use workers for entry-level positions, and they capture the lion's share of H-1B visas."
Infosys was the biggest user of the H-1B visa program in the U.S. government's 2016 fiscal year, which ended Sept. 30, applying for 25,405 visas and offering an average salary of $81,705, according to U.S. Department of Labor data compiled by Myvisajobs.com.
In June, Infosys agreed to a $1 million settlement with the New York state Attorney General's office over allegations that the company failed to adequately compensate and pay taxes for hundreds of visa workers.
The Attorney General's office claimed that Infosys brought foreign IT specialists into New York to work under temporary B-1 visitor visas rather than under the H-1B visas, which are harder to obtain and require higher pay for the workers.
"While this investigation centered on alleged paperwork errors, the company committed no wrongdoing and denies all allegations made in this regard," Infosys said in a June 23 statement. "This settlement … was reached by both parties to avoid protracted litigation."
Infosys said the case related to legal issues already resolved under a 2013 settlement with the U.S. Department of Justice. In that case, Infosys paid the U.S. government $34 million to settle similar allegations that the company was having employees with B-1 visas perform work designated for H-1B visa holders.