Infosys co-founder N R Narayana Murthy has accused the company of poor governance standards and expressed unhappiness over the compensation hike to Chief Operating Officer (COO) U B Pravin Rao.
In an email sent to DH on Sunday, Murthy said, “Giving nearly 60-70% increase in compensation for a top level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6-8% is, in my opinion, not proper.
This is grossly unfair to majority of the Infosys employees, including clerks and office boys, who are toiling hard to make the company better. The impact of such a decision will likely erode the trust and faith of the employees in the management and the board. With what conscience can a decent person like Pravin (a man schooled in Infosys values for over 30 years) tell his juniors that they should work hard and make sacrifices to reduce the cost and protect margin? I have got so many mails from these people asking whether this resolution is fair. No previous resolution in the history of the company has received such a low approval,” he said.
“Given the current poor governance standards at Infosys, let us also remember that these targets for variable pay may not be adhered to if the board wants to favour a top management person,” he said.
In February, the Infosys board had approved a hike in Rao’s fixed salary per annum to Rs 4.62 crore while the variable component of his package stood Rs 3.87 crore, payable on achievement of targets set by the board.
This is with effect from November 1, 2016. He will also be eligible for 27,250 restricted stock units (RSUs) and 43,000 stock options (ESOP) based on the fiscal 2016 performance once the same is approved by the shareholders.
Murthy’s letter comes after the company on Sunday published the e-voting results by shareholders on decisions like increasing Rao’s salary, appointment of D N Prahlad as an independent director and the new Articles of Association of the company.
According to sources, only 24% of promoters voted in favour of increment in Rao’s salary. As much as 52% of large investors (public institutions) voted against the decision.
Murthy said, "Those of us who have always stood for fairness in compensation and practised it, right from the day Infosys was founded, will have to demonstrate it when needed. This is a time when it is needed. Nothing more and nothing less."
He further stated, "I believe in striving towards reducing differences in compensation and equity in a corporation. You may not know that my Infosys salary at the time of the founding of Infosys was just 10% of my salary in my previous job. I ensured that my younger, co-founder colleagues got 20% higher salary over their salaries in their previous job even though I was seven levels above them in my previous job and was 11 years older than them.
I gave them huge equity compensation the like of which has never been replicated in this world. So, this abstention comes from somebody who has walked the talk."
"I have always felt that every senior management person of an Indian corporation has to show self-restraint in his or her compensation and perquisites. He or she has to fight for maintaining a reasonable ratio between the lowest salary and the highest salary in a corporation in a poor country like India. The board has to create a climate of opinion for such a fairness by their actions.
This is necessary if we have to make compassionate capitalism acceptable to a majority of Indians who are poor. Without compassionate capitalism, this country cannot create jobs and solve the problem of poverty. Experts tell me that capitalism may come to an end in the not-so-distant future if the current corporate leaders do not heed this advice in India, " he stated.
Saying he had nothing against Rao, Murthy wrote, “I have lots of affection for Pravin...I recruited him in 1985 and nurtured him throughout my stay at Infosys since then. He had been sidelined. He was not even a member of the executive council at Infosys in 2013 when I came back. Kris, Shibu (co-founders) and I encouraged him, elevated him to the board, and made him the COO when we recruited Vishal as the CEO. So, this abstention has nothing to do with him.”
Murthy-led founders had written to the board in February questioning governance issues in the company, huge severance pay given to former CFO Rajiv Bansal and salary hike of CEO Vishal Sikka. The issue ended after a truce between the board and founders and both parties agreeing not to discuss the subjects in public.
In an email sent to DH on Sunday, Murthy said, “Giving nearly 60-70% increase in compensation for a top level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6-8% is, in my opinion, not proper.
This is grossly unfair to majority of the Infosys employees, including clerks and office boys, who are toiling hard to make the company better. The impact of such a decision will likely erode the trust and faith of the employees in the management and the board. With what conscience can a decent person like Pravin (a man schooled in Infosys values for over 30 years) tell his juniors that they should work hard and make sacrifices to reduce the cost and protect margin? I have got so many mails from these people asking whether this resolution is fair. No previous resolution in the history of the company has received such a low approval,” he said.
“Given the current poor governance standards at Infosys, let us also remember that these targets for variable pay may not be adhered to if the board wants to favour a top management person,” he said.
In February, the Infosys board had approved a hike in Rao’s fixed salary per annum to Rs 4.62 crore while the variable component of his package stood Rs 3.87 crore, payable on achievement of targets set by the board.
This is with effect from November 1, 2016. He will also be eligible for 27,250 restricted stock units (RSUs) and 43,000 stock options (ESOP) based on the fiscal 2016 performance once the same is approved by the shareholders.
Murthy’s letter comes after the company on Sunday published the e-voting results by shareholders on decisions like increasing Rao’s salary, appointment of D N Prahlad as an independent director and the new Articles of Association of the company.
According to sources, only 24% of promoters voted in favour of increment in Rao’s salary. As much as 52% of large investors (public institutions) voted against the decision.
Murthy said, "Those of us who have always stood for fairness in compensation and practised it, right from the day Infosys was founded, will have to demonstrate it when needed. This is a time when it is needed. Nothing more and nothing less."
He further stated, "I believe in striving towards reducing differences in compensation and equity in a corporation. You may not know that my Infosys salary at the time of the founding of Infosys was just 10% of my salary in my previous job. I ensured that my younger, co-founder colleagues got 20% higher salary over their salaries in their previous job even though I was seven levels above them in my previous job and was 11 years older than them.
I gave them huge equity compensation the like of which has never been replicated in this world. So, this abstention comes from somebody who has walked the talk."
"I have always felt that every senior management person of an Indian corporation has to show self-restraint in his or her compensation and perquisites. He or she has to fight for maintaining a reasonable ratio between the lowest salary and the highest salary in a corporation in a poor country like India. The board has to create a climate of opinion for such a fairness by their actions.
This is necessary if we have to make compassionate capitalism acceptable to a majority of Indians who are poor. Without compassionate capitalism, this country cannot create jobs and solve the problem of poverty. Experts tell me that capitalism may come to an end in the not-so-distant future if the current corporate leaders do not heed this advice in India, " he stated.
Saying he had nothing against Rao, Murthy wrote, “I have lots of affection for Pravin...I recruited him in 1985 and nurtured him throughout my stay at Infosys since then. He had been sidelined. He was not even a member of the executive council at Infosys in 2013 when I came back. Kris, Shibu (co-founders) and I encouraged him, elevated him to the board, and made him the COO when we recruited Vishal as the CEO. So, this abstention has nothing to do with him.”
Murthy-led founders had written to the board in February questioning governance issues in the company, huge severance pay given to former CFO Rajiv Bansal and salary hike of CEO Vishal Sikka. The issue ended after a truce between the board and founders and both parties agreeing not to discuss the subjects in public.
