The simmering tension between Promoters and the Infy Board does not seem getting resolved anytime soon.
Salary battles at Infosys!
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- Corporate Governance issues : It seems all is not well in India’s corporate world as of now. Serious differences within the companies over issues of governance are continuously making media headlines in the recent past. Corporate Governance is a complex topic, and let us demystify it.
- First Tatas, now Infy : Corporate Governance has become a tricky issue in India of late, and differences have cropped up in major corporates. First, it was at Tata Sons, which led to the expulsion of its Chairman Cyrus Mistry, and now it is the ongoing governance struggle between the founders and the present management in IT major Infosys.
- Read a full Bodhi on Tata versus Mistry, here Read more Bodhi Saars on Corporates, here
- Challenges galore : At a time when corporate India is looking to make a headway from various domestic (demonetization, GST) challenges and global (US and Singapore immigration policies, global economic slowdown etc) challenges, the unique challenge seems to be that the Boardroom differences are now being publically discussed and debated and making media headlines! A bad idea.
- Salary too much : The first signs of differences on governance in Infosys cropped up when the founders of the company publically gave way to their displeasure over the salary hike given to the CEO Vishal Sikka, and huge severance packages given to two top-level ex-officials of the company. That issue subsided slowly.
- Chairman and CEO : Company’s chairman R. Seshasayee tried to downplay the issue saying there was no conflict of interest between the founders and the board of directors. CEO Vishal Sikka also confirmed that he had good relations with the firm’s founders.
- Another eruption : But less than two months after Chairman Seshasayee confirmed having received a commitment from the founders that company’s differences would be kept within the company, the simmering differences once again burst into the open over a resolution that came for voting on March 31 to increase the total compensation to Chief Operating Officer U. B. Pravin Rao by 35% to a whopping Rs. 12.5 crore.
- Promoters very unhappy : Most of the promoters of the company, including N. R. Narayana Murthy, abstained on the resolution. Narayana Murthy clarified the abstention this way:
(1) It has nothing to do with any individual,
(2) Those who have stood for fairness in compensation, will have to demonstrate it when needed. This is the time when it is needed most.
(3) Every senior management person has to show self-restraint in his or her compensation and perquisites.
(4) With what conscience can senior management persons tell their juniors to work hard and make sacrifices to reduce costs and protect margins?
(5) To make compassionate capitalism acceptable to the majority of Indians, who are poor, and to create jobs and solve the problem of poverty, this was necessary. - Compassion, sirs, compassion : Giving 60% to 70% increase to top level person when the compensation for most of the employees was increased by just 6% to 8% was not justified. This was unfair to the majority of the employees. The impact of such a decision may erode the trust and faith of the employees in the management and the Board.
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