Narayan Murthy

A leader is an agent of change, and progress is about change. In the words of Robert F Kennedy,
'Progress is a nice word; but change is its motivator.'

Leadership is about raising the aspirations of followers and enthusing people with a desire to reach
for the stars. For instance, Mahatma Gandhi created a vision for independence in India and raised
the aspirations of our people.

Leadership is about making people say, 'I will walk on water for you.' It is about creating a worthy
dream and helping people achieve it.

Robert Kennedy, summed up leadership best when he said, 'Others see things as they are and
wonder why; I see them as they are not and say why not?'

Adversity

A leader has to raise the confidence of followers. He should make them understand that tough
times are part of life and that they will come out better at the end of it. He has to sustain their
hope, and their energy levels to handle the difficult days.

There is no better example of this than Winston Churchill. His courageous leadership as prime
minister for Great Britain successfully led the British people from the brink of defeat during World
War II. He raised his people's hopes with the words, 'These are not dark days; these are great days
-- the greatest days our country has ever lived.'

Never is strong leadership more needed than in a crisis. In the words of Seneca, the Greek
philosopher, 'Fire is the test of gold; adversity, of strong men.'

Values

The leader has to create hope. He has to create a plausible story about a better future for the
organisation: everyone should be able to see the rainbow and catch a part of it.

This requires creating trust in people. And to create trust, the leader has to subscribe to a value
system: a protocol for behavior that enhances the confidence, commitment and enthusiasm of the
people.

Compliance to a value system creates the environment for people to have high aspirations, self
esteem, belief in fundamental values, confidence in the future and the enthusiasm necessary to
take up apparently difficult tasks. Leaders have to walk the talk and demonstrate their commitment
to a value system.
As Mahatma Gandhi said, 'We must become the change we want to see in the world.' Leaders have
to prove their belief in sacrifice and hard work. Such behavior will enthuse the employees to make
bigger sacrifices. It will help win the team's confidence, help leaders become credible, and help
create trust in their ideas.

Enhancing trust

Trust and confidence can only exist where there is a premium on transparency. The leader has to
create an environment where each person feels secure enough to be able to disclose his or her
mistakes, and resolves to improve.

Investors respect such organisations. Investors understand that the business will have good times
and bad times. What they want you to do is to level with them at all times. They want you to
disclose bad news on a proactive basis. At Infosys, our philosophy has always been, 'When in
doubt, disclose.'

Governance

Good corporate governance is about maximising shareholder value on a sustainable basis while
ensuring fairness to all stakeholders: customers, vendor-partners, investors, employees,
government and society.

A successful organisation tides over many downturns. The best index of success is its longevity.
This is predicated on adhering to the finest levels of corporate governance.

At Infosys, we have consistently adopted transparency and disclosure standards even before law
mandated it. In 1995, Infosys suffered losses in the secondary market. Under Indian GAAP
(generally accepted accounting principles), we were not required to make this information public.
Nevertheless, we published this information in our annual report.

Fearless environment

Transparency about the organisation's operations should be accompanied by an open environment

inside the organisation. You have to create an environment where any employee can disagree with
you without fear of reprisal.

In such a case, everyone makes suggestions for the common good. In the end everyone will be
better off.

On the other hand, at Enron, the CFO was running an empire where people were afraid to speak. In
some other cases, the whistle blowers have been harassed and thrown out of the company.

Managerial remuneration

We have gone towards excessive salaries and options for senior management staff. At one
company, the CEO's employment contract not only set out the model of the Mercedes the company
would buy him, but also promised a monthly first-class air ticket for his mother, along with a cash
bonus of $10 million and other benefits.

Not surprisingly, this company has already filed for bankruptcy.

Managerial remuneration should be based on three principles:

• Fairness with respect to the compensation of other employees;

• Transparency with respect to shareholders and employees;
• Accountability with respect to linking compensation with corporate performance.
Thus, the compensation should have a fixed component and a variable component. The variable
component should be linked to achieving long-term objectives of the firm. Senior management
should swim or sink with the fortunes of the company.

Senior management compensation should be reviewed by the compensation committee of the

board, which should consist only of independent directors. Further, this should be approved by the
shareholders.

I've been asked, 'How can I ask for limits on senior management compensation when I have made
millions myself?' A fair question with a straightforward answer: two systems are at play here. One
is that of the promoter, the risk taker and the capital markets; and the other is that of professional
management and compensation structures.

One cannot mix these two distinct systems, otherwise entrepreneurship will be stifled, and no new
companies will come up, no progress can take place. At the same time, there has to be fairness in
compensation: there cannot be huge differences between the top most and the bottom rung of the
ladder within an organisation.

PSPD model

A well run organisation embraces and practices a sound Predictability-Sustainability-Profitability-

Derisking (we call this the PSPD model at Infosys) model. Indeed, the long-term success of an
organisation depends on having a model that scales up profitably.

Further, every organisation must have a good derisking approach that recognises, measures and
mitigates risk along every dimension.

Integrity

Strong leadership in adverse times helps win the trust of the stakeholders, making it more likely
that they will stand by you in your hour of need. As leaders who dream of growth and progress,
integrity is your most wanted attribute.

Lead your teams to fight for the truth and never compromise on your values. I am confident that
our corporate leaders, through honest and desirable behaviour, will reap long-term benefits for
their stakeholders.

Two mottos

In conclusion, keep in mind two Sanskrit sentences: Sathyannasti Paro Dharma (there is no
dharma greater than adherence to truth); and Satyameva jayate (truth alone triumphs). Let these
be your motto for good corporate leadership.

The author is Chairman and Chief Mentor, Infosys Technologies.