Infosys is in the news again for all the wrong reasons. Last Monday, Infosys founder N R Narayana Murthy fired off a salvo against the company’s decision to hike the compensation of chief operating officer Pravin Rao by 35 per cent to Rs 12.5 crore annually.
In a widely publicised missive against the largesse doled out to someone he had groomed for over two decades, Murthy wrote, “Giving 60 to 70 per cent increase in compensation for a top-level person when the compensation for most of the employees in the company was increased by just 6-8 per cent is, in my opinion, not proper. This is grossly unfair to the majority of the Infosys employees.”
This is not the first time Narayana Murthy and other Infosys founders have come out against what they say are ‘unfair’ levels of compensation for professional heads. The rift started with the acquisition of the Israeli software company, Panaya for $200 million, a price questioned by many as over-the-top. Infosys’ CFO Rajiv Bansal, who raised issues of due diligence, exited in a flurry of controversy and a sweet Rs 25 crore deal to buy peace. Murthy let go a bombshell chiding the management with “such payments raise doubts whether the company is using such payments as hush money to hide something.”
More recently, this February, the spat revived over the very generous 55 per cent hike in emoluments to Infosys CEO Vishal Sikka. The variable pay and other adjustments had taken Sikka’s compensation to an eye-popping $11 million annually from $7.08 million.
Good Governance?
Expectedly, Infosys has stridently defended its high-cost stand. The four reasons Vishal Sikka mentioned are: the decisions are “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.” It’s not the case here that Narayan Murthy is the perfect corporate citizen. He has made a few controversial appointments like that of his son Rohan as his ‘executive assistant’. But, the issues raised by him are important: do such levels of increments and payments constitute good corporate governance?
A recent survey published by management consultants KPMG of 263 companies across sectors revealed that the highest increment was for the e-commerce sector at 12.5 percent; and the average projected increment for 2017-18 is 9.7 per cent, a decrease of 0.6 per cent from 2016-17. Can industry trends, where belt-tightening is seen all around for employees, justify such humongous compensation?
If it is for the Sikka team’s delivery of exceptionally high performance, then there is a huge question mark. In April last year, Infosys projected to grow at 13.8 percent. It has scaled this figure down twice in the year, and will now end fiscal 2017 with a less than 8 per cent revenue expansion. In the previous year, FY16, in dollar terms, the company grew 9.1 per cent with revenues of $9.5 billion. By 2020, the target is: $20 billion in revenue, and pushing EBIT (earnings before interest and tax) to 30 per cent. For this Infosys has to grow 17 per cent annually for the next five years. A difficult task indeed, in the context of growing global protectionism.
Performance Waived
It also now emerges that the chief’s compensation is not entirely linked to performance! He stands to rake in $10 million annually irrespective of Infosys’ performance.
Another clause in his contract allows him to exit for ‘good reason’ in case his compensation falls by more than 10 per cent; and therefore, Infosys must match up if it wants to retain him!
Running parallel with the Infosys story is the news the Centre has more than doubled the basic salary of the governor of the Reserve Bank Urjit Patel and his deputies. Patel’s basic salary goes up from Rs 90,000 to Rs 2.5 lakh a month, and with dearness allowance, his gross earnings would be close to Rs 4 lakh a month.
Adding other benefits of a good home and transport, Patel possibly has a package of Rs 10 lakh a month or Rs 1.2 crore a year. It is a brazen comparison, but one that must be made: Vishal Sikka earns 55 times more than the Reserve Bank Governor!
It is difficult to see what Sikka is worth or what he has contributed to justify such high levels of compensation and increments. Peers like Wipro don’t pay as much. More important, in a country struggling with extreme levels of poverty and deprivation, such figures do look outlandish.
(The author can be contacted at gurbir1@gmail.com)