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In Better Times, Two is a Crowd!
The Recent exits of The CO-CEOs at Wipro has once again Caused Experts to Critically review Wipro’s ownership-Management Equation. Are these Experts indeed off The Mark?
Issue Date - 17/02/2011
Wipro’s equation with its CEOs has bordered on the uncanny more than once. It did not make any sense then, it does not make particularly significant sense now. When Wipro’s poster boy CEO Vivek Paul quit the company, it was hard to find people who would want to believe in Wipro’s credentials as a professionally managed company. It was openly speculated what Paul’s decision had to do with his uneasy equation with Azim Premji, Chairman and 76% shareholder in Wipro. People were also compelled to make comparisons with what had transpired between former Ford Chairman Henri Ford II and Lee Iacocca years back at Ford Motor Company in the US. Also, conjectures that claimed that the road was being cleared for Azim’s son Rishad Premji were being made even then.

If these voices were somewhat in the closet then, they have had a field day in the past few weeks; as Wipro said (read marching orders) to its joint-CEOs Girish Paranjpe & Suresh Vaswani on January 21. This time, Premji himself acknowledged that the joint-CEO structure was put in place for the downturn & they need to have a simpler organisational structure post recovery, which has brought T. K. Kurien to the helm.

In later interactions with national dailies, Premji has minced no words in saying that the company had been particularly lacking lustre when it came to leveraging the growth phase of the IT industry post-recession. Indeed, the company has been underperforming its peers in the IT industry to the extent that it has come under the risk of being overtaken by Cognizant, which has been on an aggressive growth trajectory. The company reported a consolidated net profit of Rs.13.19 billion, up by just 3.36%, and a revenue increase by 1.26% sequentially to Rs.78.29 billion (IT services contributed 76% to this figure) for the quarter ending December 2010. Operating margins remained flat at 22.2%. Infosys, in comparison, posted 2.3% growth in revenues to Rs.71.06 billion and net profit increase by 2.5% to Rs.17.8 billion (qoq basis).

According to K. Sudarshan, Managing Partner, EMA Partners India, “The joint-CEO structure does not work too well in large organisations. It works in some instances, like investment banks, where the client relationships are defined and the areas of operation are defined.” But then, why was the structure instituted in the first place? Analysts say that this normally happens when two people are eligible for the same post and the company does not want to lose either of them. However, the outcome has certainly not been pleasant.

Meanwhile, the rumour mills can now speculate at leisure on the future trajectory of Rishad Premji’s profile. He was promoted to the level of Chief Strategy Officer in September 2010 and has recently been appointed as head of Wipro’s M&A strategy. Earlier, he was GM, Treasury & Investor Relations.

One point that is still bothering analysts is that Wipro has been giving Rishad such key roles so early in his career. An analyst, on condition of anonymity, told B&E, “Premji’s son is Premji’s son and it would not take him 25 long years to be on the hot seat, but it will be interesting to see how he will be ultimately brought on board”. Markets have been negative since the announcement of the results and the CEO exits on January 21. Wipro’s shares had fallen by 8.38% within a week of the announcement to close at Rs.437.9 on January 28. It is difficult to speculate how far the fall relates to the results, or to what extent it links to the top management reshuffle. But one thing is for sure – in a family run business, the ideal way forward for the owner is to choose the most eligible person to lead his business, independent of any bias. Azim Premji is the undisputed king at Wipro (unlike a certain N. R. Narayana Murthy, who just holds around 10% of Infosys shares); but that doesn’t dilute the necessity of making this distinction between professional and personal bias. While Azim Premji has always claimed to abide by this philosophy for Wipro, the world outside doesn’t seem to be so sure.

Ashutosh Harbola           

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