Of Owning And Disowning

Nowhere does the contrast between the thinking and operating styles of M/s Murthy and Premji come across starker than on the stock exchanges. To be sure, Infosys and Wipro are India's No. 1 and No. 2 value creators, according to a recent study conducted by the Boston Consulting Group for The Economic Times. The former delivered an average annual total shareholder return (tsr) of 170 per cent over a five-year period, followed closely by its Bangalore rival and neighbour at 164 per cent.

But just how many are enjoying the fruits of the superior performance of the two companies? Clearly, a lot many more Infosys shareholders than their Wipro counterparts. Because, at the end of all the hype about being the richest Indian (net worth: Rs 1,28,672 crore on February 24) and having a market capitalisation (Rs 2,02,891 crore on February 24) enough to wipe out India's fiscal deficit, the plain fact is this: there are far fewer Wipro shares floating around than there are Infosys stocks. What gives?

Simple: while Murthy holds a mere 7.7 per cent of the company's stake, Premji, in addition to holding a 4.08 per cent in his own name, has a whopping 70.95 per cent of the total equity of the company in association with other corporate bodies. Which means 75.03 per cent of Wipro is in Premji's hands, leaving little stock in play. With so few around, wild swings in fortune are natural. For example, from the year's high of Rs 9,600 in February, Wipro is now hovering around the Rs 2,800 mark.

On the other hand, at Infosys, pioneering Murthy has given away nearly 20 per cent of the stock to employees in stock options (esops); private individuals in all hold 25 per cent. Foreign institutional investors have another 25 per cent and mutual funds, banks and financial institutions have 13 per cent. The founders and their families in all have 30 per cent while companies account for 3 per cent and nris, one per cent. Infosys has also floated American Depository Receipts which account for 3 per cent.

Which is why Bhavin Shah, the Hong Kong-based head of Asia research at Credit Suisse First Boston, says Premji will have to sell some of his 75 per cent stake if he wants to become a global player. The small number of Wipro's floating shares, he believes, hurts investor interest especially when they can lay their hands on shares of other star-players like Infosys and Satyam.

Narayanamurthy is clear why he had to create the stock option plan: to attract talent outside India. But Premji has been especially slow to cotton on to the concept and that too after the loss of his two star players, Ashok Soota and Krishna Kumar, who left to start MindTree Consultancy last year. "Soota would have had 10 times more stock options had he been at Infosys," one newspaper said at the time in a report.

"When it has come to sharing his wealth, Premji has remained an enigma," says Sridhar Mitta, former chief technology officer of Wipro's r&d division and now head of e4e Labs, a technology incubator: "I could not understand him even after 20 years of association.... I have a feeling that he announced the stock option not out of appreciation for his employees but because of pressure and competition."

But Premji is unfazed. Leaders, he said at a lecture at the All India Management Association, must build star performers and teams. "They must not only attract the best of minds to join the organisation but also create a strong sense of ownership in them." While announcing the annual results last month, he went even further: "Suppose I had divested at Rs 9,800 a share, would I have shared my wealth? I'm not trying to be funny on this issue, I think our stocks are liquid enough. We are aware of our social responsibilities and have been sensitive to them." Wipro's shareholders, who have seen a 71.5 per cent fall in the stock's value from its February high, may wonder.