Narayan Murthy admits he is ‘distressed by Infosys board’s decisions’, questions high severance packages
Amid reports of tension between the bigwigs and company’s board over certain decisions, Infosys co-founder Narayan Murthy has said that the ‘issue was not with its present CEO but with the governance culture at the board’.
"The issue is not with (CEO) Vishal Sikka but with the quality of governance at the board. It has slipped," Murthy, the first chairman of the country’s second largest IT form, told TOI.
Besides Murthy, company’s founding members Kris Gopalakrishnan and Nandan Nilekani had last month written a letter to the company's board raising corporate governance concerns including the hike given to its CEO Vishal Sikka. The three also questioned the high severance package given to two former senior officials.
Questioning the high severance package given to two former senior officials, Murthy, who along with his family is the single largest shareholder (3.44 per cent) in the company, said that some of the ‘decision was at breach of the established practices’ at the 26-year-old company.
The 70-year-old IT industrialist said told TOI that he was concerned at the impact of hefty payouts for some senior executives on employee morale.
"When David Kennedy (former legal and compliance head who quit recently) was appointed, it appears nobody went into details and asked, is it normal at Infosys to accept 12 months as severance pay, when the norm for all others is 3 months? It is the work of the chair of the remunerations committee to do that. When the former CFO Rajiv Bansal left, should he have got 30 months' severance pay? That is 10 times the norm at Infosys. What is the real reason behind such an extraordinary payment?” Murthy asked.
Last year, the Bengaluru-based software services exporter had raised the annual package of Vishal Sikka to USD 11 million (approx Rs 74 crore), which includes variable pay subject to certain performance-based targets. Besides, his term has been extended till 2021. Besides, high severance package given to two former senior officials.
While former Chief Financial Officer (CFO) Rajiv Bansal's severance package amounted to 173.8 million rupees (over Rs 17 crore) or equivalent to his two-year package, former General Counsel David Kennedy will receive severance payments of USD 868,250 (approx Rs 6 crore) and other reimbursements over one year.
"What kind of signal does this send to employees? So many employees at senior, middle-level and junior levels at Infosys are unhappy. I have received over 1,800 emails from various employees expressing their unhappiness at this situation. The common question they have all asked me is, if it is fair that they got only 80 per cent of the variable part of compensation while somebody who has left the company is given 100 per cent variable for the next two years after leaving. These are a subset of the governance issues," TOI quoted him as saying.
Murthy said that the Infosys, the largest employer of H-1B Visa professionals in the United States, needs to address such issues which have brought down the morale of employees.
Meanwhile, mired in controversy centring around differences between its founders and the management, Infosys has denied any governance lapses and emphasised that its board is ‘fully aligned with the strategic direction of CEO Sikka’.
Taking a strong stand on issues -- purportedly raised by the founders -- such as CEO's compensation and severance pay of former employees, Infosys said that while the board appreciates and respects inputs from the founders, it is committed to fulfilling its fiduciary responsibility to ‘act independently’.
"The board is fully aligned with the strategic direction of Dr Vishal Sikka and is very appreciative of the initiatives taken by him in pursuance of this transformation," Infosys Chairman R Seshasayee said.
"Vishal and the board, while being pleased with the company's resumption of industry-leading performance on many parameters, are keen to further accelerate
the progress and achieve even more shareholder value increase, on the foundation of sound governance," Seshasayee added.
Over the past few days, the Bengaluru-based firm has come under fire over purported differences between some of the founders and the Infosys board. Infosys has maintained that all decisions were made ‘in the overall interest of the company’ and that it has made ‘full disclosures’ on all developments.