India’s largest software outsourcing giants Infosys is heading for a corporate boardroom battle. Founders of Infosys have flagged concerns over the governance of the company.
NR Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani wrote to the board last month expressing apprehensions about – the pay rise of Vishal Sikka, severance packages given to two former senior officials and appointment of independent director Punita Sinha. The relationship between the founders and Vishal Sikka are sour. However, it is not yet confirmed if the founders are going to change the CEO.
Infosys commenting on the report said “With regard to concerns on governance… we would like to reiterate that all decisions have been made bona fide, in the overall interest of the company, and that full disclosures have already been made thereon”
Firstly, the founders among others were irked by the increase in compensation of Chief Executive Vishal Sikka. The first non-founder chief’s pay starting January is USD 11 million per year, with USD 3 million in fixed salary and USD 8 million being the variable component. Sikka used to draw USD 7.08 million last year.
Defending the move, the company barbed that Sikka’s cash compensation actually went down and the increase has been primarily in RSUs (restricted stock units) and stock options. Further they said that that these are directly related in realising the target of becoming a USD 20 billion company by 2021.
Infosys currently has revenue of about $10 billion. The founders along with their family members owned 12.75 percent of the company as of December.
Secondly, the founders questioned the severance package of former Chief Financial Officer Rajiv Bansal, and General Counsel David Kennedy.
Compensation offered to former Executive VP Michael Reh is under deliberation. The rationale behind this move is the need for the company to adopt international standards. Bansal who quit in October 2015 was handed a severance package of Rs 17.38 crore. Kennedy who quit in December was paid $868,250 including reimbursements for COBRA (insurance) continuation coverage for over a period of 12 months.
Finally, the appointment of independent director Punita Sinha, wife of Union Minister Jayant Sinha faced censure. Once considered a shining example of high corporate governance, countering allegations of nepotism, Infosys defended its decision and affirmed that Sinha has the requisite qualification for the job. They further added that Sinha will bring valuable perspectives to the Infosys Board”.
Sikka who took over in August 2014 held that companies need to innovate and offer value-added services, which demands significant acquisitions. The founders have been wary and always stayed away from acquisitions.
Previously, promoters of Infosys have refrained from voting to give an extension to Sikka for another two years which came with an increase in compensation.
This conflict is similar to that of Tata’s battle. Cyrus Mistry’s shrunken presence at Tata Sons formally ended earlier this week as the company decided to oust him as a director of the Tata Sons board at an extraordinary general meeting.
