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Infosys - Another Boardroom Battle Brewing?
Wed, 5 Apr Pre-Open

After the Tata Group boardroom battle, another such skirmish seems to be brewing among the IT titans. The latest spat is between Infosys founder NR Narayana Murthy and the board of the company over how executives are paid.

Barely two months after a face-off between founders and management on issues such as CEO salary hike and severance package to former employees, a fresh row has erupted between the two sides, this time over the Chief Operating Officer (COO) Pravin Rao's compensation.

The altercation came to the fore after co-founder and former chairman N R Narayana Murthy, in a letter addressed to journalists, expressed his disagreement with the board's decision to hike the COO's salary and.

In October, Infosys said it was raising Rao's salary to include a fixed compensation of Rs 46.2 million and a variable compensation of Rs 38.8 million per annum.

Mr Murthy criticised the 35% hike in COO compensation calling it 'grossly unfair' to the majority of Infosys employees who get annual hikes of 6-8%.

When this was put to a vote 67% of the shareholders approved the raise, while only 24% of the promoter votes were cast in favour of the resolution.

Simmering discontent between the founders and the current board is adding fire to the speculation that the IT giant may be following in the footsteps of the Tata Group fiasco.

Infosys founders had also previously questioned the salary being paid to Infosys' chief executive officer (CEO), Vishal Sikka.

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Sikka, appointed in August 2014, has seen a 11-fold jump in his take-home salary (including bonus and incentives) to Rs 487.3 million in FY16. In fact, Sikka draws the highest salary amongst the current lot of CEOs of large and mid-sized IT companies.

In a detailed rebuttal, the Infosys board defended its decision saying that it has reduced the COO's fixed pay while allowing an increase in variable pay based on performance.

The company said the cash component of Rao's salary, including annual cash bonus, has fallen 10.6% to Rs 46 million, from the previous Rs 52 million, while the performance-based component, directly linked to company and individual performance, has been increased to 63% from 45% of total compensation.

The latest salvo by Murthy comes at a time when the company has appointed Cyril Amarchand Mangaldas as a mediator to finalise a corporate governance framework to take inputs of founders and other stakeholders.

In February, Murthy had slammed the governance at Infosys, saying it was flawed and that the chairman of the board and remuneration committee needed to take responsibility for the falling standards.

Former Infosys executive V Balakrishnan said pay hikes should be linked to improvement in shareholder returns.

has lost about a fifth of its value in the last one year as growth in the information technology industry has slowed down amid digital disruption and rise of protectionist governments in the US and UK.

Corporate governance is very important when it comes to investing. While maintaining transparency, and having effective policies in place, are some of the ways to gauge the same, investors would do well to keep away from companies whose executives continue rewarding themselves irrespective of how the business is performing.

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Jan 22, 2018 (Close)