Four Lessons On Managing Reputation From The Infosys Episode Last Week

The Infosys yoyo last week has great lessons for us all in business. The IT giant of India saw radical swings in its reputation. Saddled with a challenge to maintain a balance between tough global business environment and shareholders’ expectation, it decided to buyback some of its shares. Nothing wrong in this action. A few of its peers are doing it too.

But just before the final approval on this by its Board, Vishal Sikka, Infosys’ CEO and MD resigned. In the absence of any other tool to measure the impact, the stock price is the only credible way the sentiment can be gauged. It was all negative there. The stock price fell 9.6% on a single day. Infosys registered a 52-week high and 52-week low on consecutive days! The TV channels had got their story for the day. The media became the laundry where this dirty-linen was being washed. The laundry bill, paid by its investors, came as a whopping Rs.22,519.50 crore loss in market capitalization. The stock market experts feel that it could have been far worse if the share buy-back was not on the radar.

The impact on Infosys’ reputation is, perhaps, far worse. Mr. Narayana Murthy, considered till yesterday as a poster-boy of corporate governance and middle-class values in India, suddenly is made to look like a villain of the piece. The Infosys’ Board does not seem to like him anymore. He is now a mere 3.4% shareholder and not a founder who was a pillar of strength on which the edifice of Infosys was built. I am sure that it was the worst day in his life by the extent on name calling and abuses he received. Sikka is emerging as the hero. Despite not being on course of achieving $20 billion revenue target, despite not achieving 30% automation target and despite not achieving revenues of $1,5 billion through inorganic route. Getting ‘rid’ of CFO Sanjay Bansal, the Panaya deal, etc. being other alleged blots on his reputation while at Infosys. He is still emerging as a hero. The truth will come out of the closet one day. Hope that it is not too late by then.

There are a few lessons for all of us in this. The first lesson to learn from the episode is that “It takes a lifetime to build a good reputation, but you can lose it in a minute”. The rise in reputation is a slow climb uphill, but the fall is normally a rapid descent off the cliff.

The second lesson is that no one gains by washing dirty linen in public. There is nothing that cannot be discussed and settled amicably inside the Board room of the Company. The boardroom is precisely created to resolve disputes and disagreements through discussion.

The third lesson is that a dent in the reputation of a business results into tangible loss in market capitalization and also in topline and bottomline. It is perhaps the only intangible thing that converts into tangible results

The fourth lesson is that reputation is everything, no matter how small or big your business is today.

So, guard your reputation with as much intensity as you guard other aspects of your business. Only doing good does not seem to be enough, stakeholders should also know it.