N R Narayana Murthy | January 04, 2005

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, vendorpartners, 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 firstclass 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 PredictabilitySustainability-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.
Published with the kind permission of The Smart Manager.