Infosys presser highlights: No conflict with founders, says Seshasayee

Edited excerpts from Infosys press conference

The Infosys board called a press conference on Monday to explain various issues. Chairman R Seshasayee and CEO Vishal Sikka addressed the media and answered questions. Edited excerpts:

On the need to call the press conference 

Seshasayee: Too many questions were raised and we thought we should address these. I want to thank employees, who have remained undisturbed, undiverted and have been discharging their work to clients all these days. I also want to thank investors who have remained unperturbed.

Last few days, media has been describing the situation at Infosys as a battle, and war paint, bugles…. I don’t look at this as a battle. A battle happens if you have two people with conflicting interests. But we have a situation where some founders and others, who have nothing other than the best interest of the company in mind. Obviously there is a lot of passion, coz if you have invested your life in building an institution, it is but natural for you to have a great deal of passion for the company.

We too are a bunch of professionals, with no other interest than discharging the professional responsibilities in the best interest of the company.
 

Therefore, there is no conflict of interest.

For sure, you will have differences in views and perceptions, and business judgements. It is our job as the members of the board to listen to all interest and take the substance of messages that are delivered to us, assimilate them, be sensitive to them and calibrate our actions.

Appointment of directors

Seshasayee: Issues were raised about appointment of some people on board. We are very proud to have Punita Kumar-Sinha on board, someone who has very high academic achievement and who is an extremely accomplished professional. You would agree that a woman should not be judged by the profession of her spouse. 

I do not think there is a governance issue, rather I think we have a very rich diverse board. 

On the appointment of DN Prahlad

Seshasayee: Let me assure you, he qualifies as an independent director by the criteria laid down. No doubt he was suggested to us by the founders, but we went through the process of selecting him on board. Four of us met with him. He has a deep understanding of the business. I don’t think that this is a governance issue.

On Vishal Sikka’s compensation

Seshasayee: We had said that his compensation was raised to $11 million. The fixed component has come down from $5.08 million to $4 million. The variable component went up and had two components. One component was linked to his longevity, which is important for the stability of the company and the rest was linked to his performance. Compared to the earlier package, the package that went up was tightly linked to performance. And this was a two to three month process. We had a process and that was to have a global consultant which compared this to peer companies in the global market. Aligning the CEO’s compensation was normal global practice. 

It included compensation and we also ensured that we gave a package for Vishal for leading this company with a very ambitious target. This had 98% approval from shareholders. 

We did what we thought was in the best interest of the company.  

On Rajiv Bansal’s severance package

Seshasayee: While determining the severance pay for Rajiv Bansal, we explained the circumstances. At that time, there was a business judgement and application of mind. His severance packaged agreed then was Rs 17.38 crore, but the actual payment done was around Rs 5 crore. We have also explained the circumstance in which we mutually agreed to separate. 

In retrospect, I have no hesitation to say, perhaps that judgement would have been different if circumstances were different or if the processes were there. The price gap was that we had subjectivity as part of severance package.

The learning was that the subjectivity element should have been taken away. And then we went on for a process change and worked with a consultant to look into the severance table for various geographies, for various executives, and, we wrote a new employment contract for all key management personnel.

The perception was that there was no application of mind. The only thing is that there was a subjective element. We shouldn’t have a subjective element and have made changes in the employment contract in October 2016.

I don’t think there was a governance issue.

On the suspicion of it being hush money 

Seshasayee: That is deeply disturbing. We had an anonymous whistlebowler complaint. We followed with it, which is a good practice of the company.
 

We conducted a detailed investigation. The investigation was done by an independent global law firm, shadowed by our audit firm and overseen by global law firm and there was no intention to silence anyone. Then we put it on our website in October 2016.

On David Kennedy 

Seshasayee: Kennedy had an employment contract which specified that said that if there was a separation happens then severance pay was decided at 12 months of the salary. Both in case of Rajiv Bansal and Kennedy the process was followed. We had made disclosures as required for Rajiv Bansal and David Kennedy.

The disclosures were adequately done internally as well as to external counsels. The board has to accept professional guidance.

Profligacy of CEO

Seshasayee: I was asked why was Sikka using the corporate jet? We do not have a corporate jet. He has chartered flights. From now the CEO expenses will be approved by the audit committee. 

I looked at all travel details. And for the period, November to January - Vishal Sikka would have travelled around 50,000-60,000 kilometers a month. Of this 8% was spent on chartered flights. 

Focusing on the cost without focusing on the value is a disservice. If you expect the CEO to be contacting customers, it is important that we have the equation between cost and value.

Similarly, what we have created in our office at the Bay Area is fantastic. It is a place for promoting innovation. We also took a place on High Street. I think to be recognised as a truly global company we need to have a front end that resembles a global office. We should have a branding that does not look like a back-office, but a front office. Vishal took the place on rent. The figures of $1 million a month that is being quoted needs to be understood because this is the Bay Area, we are not in India.

What is being picked up is that one number instead of the true cause and value that is being generated.

On governance looking forward

Seshasayee: Other than the banks, you do not have companies of large size that has a professional management and a professional board. In this case it is important to have a framework of governance.

Why is it necessary? In a company like Infosys, there are vast number of shareholders. Therefore you have many shareholders, there are different needs for consultations on the board. How do you make sure you create common ground of values? 

We have a number of people coming up for retirement. We need to make sure that there is a succession planning, so that there is no narrow point of view of one group.

This is not about the law firm to mediate. It is not about a fight, it is about passionate expression of comments.

We will take the substance of - not arbitrary, not narrow focus decisions on board compensation and governance issues.

We will continue to engage with all stakeholders. We are engaging with all founders, we will continue to engage with founders, and other stakeholders.
 

Given the fact that we have the founders, who with a lot of passion built this institution, we will give them due respect. At the end of the day, we are answerable to all shareholders. We have fiduciary responsibility for all shareholders.

On capital allocation

Vishal Sikka: The board will look into capital allocation policy time and again. We are custodians of this business. The strategy I have laid out is new, renew. Why I came to Infosys was because of the keenness on tradition and upholding values and culture. We have done well in performance in revenue terms, customer satisfaction or opening new frontiers. We have upheld values. These are not easy times.

On founders pointing fingers to the chairman’s office 

Seshasayee: Governance is a collective decision of the board. We are all committed to principles of governance. That there is lack of governance is a matter of perception. So far as I am concerned, the shareholders have given me a job. The board has given me a job. I will do it.

On Panaya acquisition 

We followed the due process. Rajiv was the certifying authority and he signed. No issue of skipping a process.

Did the founders write to the board in confidence to discuss this issue?

Murthy (N R Narayana Murthy) was gracious enough to suggest that let’s take this discussion forward and we do not need to talk to media. And that's why you see his statement on this. What has happened... we cannot pull back.