Infosys deflects Murthy's criticism, says Rao's hike must to retain talent

Rao's annual cash payment decreased by 10.6% to Rs 4.6 cr, performance-based salary increased by 63%

Infosys has defended the pay hike extended to its Chief Operating Officer Pravin Rao, saying the stock-linked compensation to its senior management, including Rao, was needed to retain talent as the company underwent a transformation.

Rao's compensation revision reflects the philosophy of aligning the interests of our leadership team to long-term shareholder interests, Infosys said in a statement on Monday, as it deflected criticism by its founder N R Narayana Murthy over the pay hike.

Murthy, who as part of the promoter group shareholders abstained from voting in a resolution to increase the pay to Rao, had criticised the board of poor governance, and also questioned the conscience of the three-decade veteran at Infosys in accepting the hike.

"Pravin's commitment and contribution to the company has been immense, and his partnership over the past three years has been critical to the successes and growth of our company," said Vishal Sikka, chief executive officer at Infosys. "It is essential for us to see that this revision in his compensation, as with several of our senior leadership team, is focused on making Infosys more competitive, is benchmarked against peers, is critical for us to retain key talent and aligns the long-term interests of our leadership team with that of our shareholders."

The defence by Infosys after two-thirds of its shareholders supported the pay hike to Rao, also indicates that the company would take Murthy head on than dilute its stand.

Infosys said Rao's annual cash compensation decreased by 10.6 per cent to Rs 4.6 crore from the earlier Rs 5.2 crore, while performance-based salary has increased to 63 per cent from 45 per cent. With a four-year stock vesting, the net increase in salary would be 1.4 per cent in 2018 financial year, which would go up to 33.4 per cent in the fourth year, subject to meeting commitments set by the board.

Analysts questioned Murthy on raising the compensation issue saying that any senior executive salary should be benchmarked with industry and performance.

"It is unfortunate that they are raising this issue again. Salary hike has to be seen in the context of whether it is linked to performance and second is how it is comparable with peers," said Shriram Subramaniam, founder and managing director of InGovern, a proxy advisory firm.

In February, the board had approved Rao's salary hike, introducing a higher performance-driven compensation that would be benchmarked to targets set by Vishal Sikka.

The company set itself a $20-billion revenue target by 2020, nearly double its expected revenue in 2016-17. The results for FY17 will be declared on April 13.

Murthy had doubted the board's commitment to enforce the 2020 targets of Sikka, saying that the current governance standards at Infosys were poor.

"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," wrote Murthy on Sunday.