OppenheimerFunds, Inc. acts as investment adviser to certain investment funds and accounts that collectively own approximately 2.7% of the capitalization of Infosys, valued at $923 million currently. We have been significant investors in Infosys for more than a decade. During this period, we have witnessed patches of unusual turmoil in management and vision at Infosys, with share price performance signalling shareholder exhaustion with internal dissonance, management volatility and internal intrigue.
We have been enormously pleased to see the stabilising hands of Dr Vishal Sikka, who has improved underlying operating performance and begun to articulate a coherent strategy to a firm beset by a host of structural challenges to the ageing offshore IT service industry.
Under Vishal's leadership, Infosys has witnessed material improvements in financial and operating metrics. He has improved customer satisfaction scores with the firm implementation of Zero Distance and Design Thinking initiatives. Infosys has recovered market share, leading to material revenue acceleration. And attrition rates within the firm have settled after a period of relative volatility.
Perhaps more importantly, Vishal has articulated a strategic vision to enhance the competitive differentiation of Infosys and prepare it for what will likely be a highly disruptive phase in the IT service markets. The IT industry is undergoing an enormous structural shift associated with cloud migration, potentially deflationary influences of automation across service lines, and broader concerns about levels of saturation, competition and immigration restraints.
Success over the next few years as the industry transitions will require cultural and organisational changes and steadfast execution. Change is never easy for organisations. But all IT service companies
will be required to better align interests with client priorities by aggressively promoting automation and by investing in innovation. This will require investment through the income statement (development expenses) and the balance sheet (acquisitions). We encourage the Board of Directors to reaffirm support for Dr Sikka's authority to execute while discouraging internal dissonance. After many years of organisational chaos, it is time for the Board to get behind their designated CEO and let him execute.
It is the fiduciary responsibility of the Board to resolve these tensions. As recent history has shown, rumours cause confusion and distraction among multiple stakeholders in the Company, including its employees, clients and shareholders. Infosys has barely recovered from a period of high attrition and internal fractions in FY2015, which hurt financial and operational performance.
With all deference to their enormous contributions, we also believe that non-executive founders need to come to grips with the reality that this is a public company. It is no longer their firm. As of December 31, 2016, the non-executive founders (promoter and promoter group) owned 12.8% of the Company’s outstanding shares. Furthermore, it was reported that they sold 7.5 million shares in March 2016. The Board needs to clarify the appropriate role of non-executive founders of the Company.
Infosys is a respected and influential corporation in India. It was one of the first Indian companies
to adopt global best practices in corporate governance. Its entrepreneurial origins and legacy of success have been an inspiration for many generations of talented engineers. We strongly encourage the Board to act decisively to ensure the longevity of this reputation — in the interests of all stakeholders — customers, shareholders and the nearly 200,000 Infoscions that work at Infosys today.