Citing global standards, Infosys on Monday strongly defended an over 33 per cent pay hike for its COO. Former executives V Balakrishnan and T V Mohandas Pai joined co-founder N R Narayana Murthy in criticising the move.
The country’s second-largest software services company said the increase in Rao’s salary followed a comprehensive survey of best practices and benchmarked senior management compensation with key Indian and global companies.
The eruption of a fresh row between some founders and the top management saw the stock take a beating with a fall of over 1 per cent in an overall bullish market.
The company claimed that the net hike for Rao came to just 1.4 per cent for 2017-18 after accounting for a four-year vesting period of stock, a 10.6 per cent drop in cash component and performance-based pay going up to 63 per cent from 45 per cent of total compensation.
“This (hike) could go up to 33.4 per cent in year 4, assuming similar grants are made in subsequent years based on company and individual performance,” Infosys explained.
Soon after shareholders voted for Rao’s pay hike, Murthy opposed the proposal saying near “60 per cent to 70 per cent increase in compensation” to the COO is “not proper” when most employees got just 6-8 per cent hike.
“This is grossly unfair to the majority of the Infosys employees,” he had said. “The impact of such a decision will likely erode the trust and faith of the employees in the management and the board.”
Murthy had abstained from the resolution on raising Rao’s salary. Only 24 per cent of promoter shares voted in favour of the resolution while the rest abstained.
The proposal was placed before the shareholders and the recommendations have been approved by 67.5 per cent of them while 32.5 per cent voted against the proposal.
Among non-promoters, 24.5 per cent institutional investors and over 67 per cent non-institutional shareholders voted against the proposal.
Infosys said the revision that has been rolled out for several members of the senior leadership team is “focused on making Infosys more competitive, is benchmarked against peers” and is critical to retaining key talent.
The fresh rift comes barely two months after a similar face-off between the founders and management on issues like CEO salary hike and severance package to former employees.
Infosys said it viewed Murthy’s statement as “important feedback” and will continue to work with all stakeholders to ensure long-term interest of the company.
Explaining the increase, Infosys said the cash component of Rao’s package had decreased by 10.6 per cent to Rs 4.6 crore from Rs 5.2 crore.
Former Infosys executives like Balakrishnan and Mohandas Pai have rallied behind Murthy. The executives, who were part of the leadership team for a significant part of their careers, highlighted that there are corporate governance lapses at Infosys that need to be checked.
Balakrishnan, who served as CFO, said there was a need for reconstituting the company board as the golden standards of governance and value system that Infosys was known for, are “being decimated under the current leadership”.
Pai, on his part, said since Infosys is an Indian company, it should follow Indian standards for compensation.
Murthy, along with Balakrishnan and Pai, has previously publicly aired his views on what he refers to as falling governance standards at Infosys.
In February, Murthy had questioned the steep severance payments made to former employees, Rajiv Bansal and David Kennedy, asking if the same was “hush money”.
The tussle also saw whistleblowers sending letters to market regulator Sebi alleging irregularities in Infosys’ USD 200 million acquisition of Israeli firm Panaya.
The company, however, had refuted all allegations, saying these are “misleading”. Sikka and Seshasayee had also called a press conference to explain the company’s stand on the issues pointed out by the promoters.