In an e-mail sent out on Sunday evening, Murthy reiterates that the company he once founded still has corporate governance issues.
Infosys founder Narayana Murthy. Credit: Reuters
New Delhi: Infosys founders, led by N R Narayana Murthy, on Sunday criticised the proposed salary hike of Chief Operating Officer (COO) Pravin Rao, deepening the rift between them and the board of the country’s second-largest software exporter on governance issues.
Rao’s compensation, to rise 35% to Rs 8.5 crore annually, has, however, been approved by co-founder Nandan Nilekani and a majority of institutional investors, according to results of postal ballots disclosed by Infosys in its regulatory filings.
Institutional investors hold a 57.85% stake in the company; the founders, including their family members, collectively own a 12.75% stake.
In February, the board had approved Rao’s salary hike, introducing a higher performance-driven compensation that would be benchmarked to targets set by Chief Executive Officer Vishal Sikka.
Murthy, who hired Rao three decades ago and helped elevate him to COO and to the board, in an email on Sunday evening said this was the time to demonstrate the fairness in compensation that the company had practised since inception.
“Giving 60 to 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,” Murthy wrote. “This is grossly unfair to the majority of the Infosys employees… (from project managers to 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.”
Murthy’s fresh salvo on governance issues and the board since the February truce comes even as the company is investigating complaints against the acquisition of Israeli firm Panaya and the severance package for former chief financial officer Rajiv Bansal.
In February, Murthy, who made his concerns over failing corporate governance at Infosys public, had asked for the resignation of Infosys Chairman R Seshasayee.
Separately, a whistleblower had complained there were violations of company law, rules of the US Securities and Exchanges Commission (SEC), and the Securities and Exchange Board of India (Sebi) regulations in disclosures of payments to Bansal.
Murthy on Sunday also asked Rao to check his conscience before accepting the increase in compensation. “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 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 added, “Finally, 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.”
The Wire Staff adds: Murthy’s full letter, sent out on Sunday evening, is reproduced below.
Dear Folks,
If you use the contents of this mail, please quote me verbatim and in full. Please do not paraphrase.
I have lots of affection for Pravin. Let me state you the facts.
I recruited Pravin in 1985 and had 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 snd 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 Pravin.
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.
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 7 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.
Further, giving nearly 60% to 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% to 8% is, in my opinion, not proper. This is grossly unfair to the majority of the Infosys employees including project managers, delivery managers, analysts, programmers, salespeople in the field, entry level engineers, 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 sacrifice to reduce 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.
Finally, 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 favor a top management person.
(By arrangement with Business Standard)