The Infosys problem: Sikka's pay, corporate governance and upset founders

Infosys founders have questioned CEO Vishal Sikka's compensation

For the past few days, IT major Infosys has been in the news after the company's founders expressed concerns over transparency and corporate governance. They have questioned the compensation package of Chief Executive Officer (CEO) Vishal Sikka and the severance package to its former chief compliance officer David Kennedy.

Infosys founder N R Narayana Murthy has asked how the company would achieve the $20-billion target by 2020, as set by Sikka, in an uncertain global environment, said sources. Last month, Murthy, Nandan Nilekani and Kris Gopalakrishnan raised their concerns with the board.

Last year, promoters of Infosys had abstained from voting to give an extension to Sikka for another two years. The extension also came with an increase in compensation.

The issues at Infosys are: 

The severance package of former CFO Rajiv Bansal (Rs 17.38 crore), and no adequate explanation on the package offered.

The untimely exit of David Kennedy and his compensation package ($868,250 million). 

Vishal Sikka's annual compensation (Rs 49 crore)

Vishal Sikka's shift in culture towards a less-people more-software-driven business approach

Shareholders raising concern on buyback options. 

Infosys losing its image of the transparent organisation. 

Company's decision to hire Punita Sinha, wife of Union Minister Jayant Sinha, as the independent director. 

What Infosys has said: 

Infosys said it had already addressed concerns about executive pay after media reported that its founders had complained about decisions including a pay hike for Chief Executive Vishal Sikka.

Neither the founders nor board members are officially comment on the alleged face-off

Kiran Mazumdar-Shaw, a board member of Infosys, went on to say that there is no rift between Vishal Sikka and the board. “There is absolutely no (such) problem and yet the media seems to be giving the impression that there is a huge rift,” said Kiran Mazumdar-Shaw, board member, in a telephonic interview. 

A senior member on the board who wasn’t willing to be named, however,  told Economic Times: “One generation has to give space to the new generation. Any kind of rigidity (by the founders) can break the other two (the CEO and the board).” He points out that the differences may be cultural – of two generations – in areas like delegation of power, spends on promotions, dealing with clients and partners, and spends on talent acquisition.

Former Infosys CFO Pai calls for a detailed answer from the board

Former CFO T V Mohandas Pai said the board should give a detailed answer and not take shelter under "bland" statement that decisions were taken in the interest of the company.

"The founders who have built the company and created a value system have raised serious issues. As far as I know, no CFO in India has got a 24-month separation," said the former Infosys board member.

Pai said a CEO's pay should be linked to his performance, achievement of the annual plan and increase in shareholder value. Commenting on Cognizant's move to opt for share buyback, he said, "Elliott Capital had written a letter to Cognizant asking to increase the value of shares and buyback. Cognizant board has agreed. Indian institutions should also listen to the shareholders' demand."