Responding to allegations of improper pay increases to top management, Infosys said it had undertaken a comprehensive survey of the best practices and bench-marked senior management compensation with key Indian and global companies.
As per the revised compensation structure, the proportion of cash component in the total compensation of senior leaders had been reduced and higher stock incentives to be vested over a four-year period had been introduced, the company said in a statement.
“This was rolled out for the entire senior leadership including Mr. Pravin Rao, chief operating officer,” the company added.
On Sunday, Infosys founder N.R. Narayana Murthy had said the compensation raise given to COO U.B. Pravin Rao was not proper.
Mr. Murthy said the hefty increase to top management would likely erode the employees’ faith in the management and the board. He also criticised the board for poor governance.
Fixed salary declines
According to Infosys, the fixed component of Mr. Rao’s compensation had decreased from ₹5.2 crore, including annual cash bonus, to ₹4.6 crore. The performance-based component of the compensation, directly linked to company and individual performance, had been increased from 45% to 63% of total compensation.
“Given the four-year vesting period of the stock, the net increase in Mr. Pravin Rao’s compensation for FY18 will be 1.4%. This could go up to 33.4% in year 4, assuming similar grants are made in subsequent years based on the company’s performance and individual performance,” it said.
As per the results of the postal ballot disclosed to the stock exchange, about 32.54% of shareholders voted against the decision to raise Mr. Rao’s salary.
Mr. Murthy had also questioned the results and had said, “No previous resolution in the history of the company has received such a low approval.”
Infosys said the details of the wage revision were disclosed in stock exchange filings on October 14, 2016. In February, the firm’s founders, led by Mr. Murthy, had written to the board questioning governance issues in the company, the huge severance pay given to former CFO Rajiv Bansal, and the salary increase to CEO Vishal Sikka. Eventually, both parties agreed not to discuss such issues in public.
Intervention questioned
“This is quite unfortunate that the issue which reached a truce is again coming [up] for discussion,” said Shriram Subramanian, MD, InGovern, a corporate governance research and advisory firm. “The unfortunate part is that Mr. Murthy may have his views, but other investors may not have the same viewpoint. Obviously, the board, being the nominated body by the shareholders to act on their behalf, is doing its job.”
Mr. Subramanian also asked why Mr. Murthy, as an unhappy shareholder, was not calling for a change of board. “He is not doing that. The sad part is that he is only losing credibility. If he had an issue, he should have written a letter to board rather than to the media.”
Pai backs founder
Backing Mr. Murthy’s view that the pay raise to Mr. Rao was ‘not proper’, the company’s ex-director T. V. Mohandas Pai said the salary in this case was “spectacular” but that the performance was not.
Alleging that Infosys’ board was ‘misguided’, Mr. Pai said the ‘fundamental problem’ was the pay increase given earlier to CEO Vishal Sikka “without any justification”, because of which other executives were also expecting higher pay. He said salary levels in India could not be compared with those in the U.S.
(With PTI inputs)
