Infy founder, board rift erupts again as Murthy slams COO's salary hike

Murthy says higher compensation would erode employee trust in board and management of Infosys

Infosys founders, led by N R Narayana Murthy, on Sunday criticised the proposed salary hike of Chief Operating Officer (COO) Pravin Rao, deepening the rift between them and the board of the country’s second-largest software exporter on governance issues. 

Rao’s compensation, to rise 35 per cent to Rs 8.5 crore annually, has, however, been approved by co-founder Nandan Nilekani and a majority of institutional investors, according to results of postal ballots disclosed by Infosys in its regulatory filings.  

Institutional investors hold 57.85 per cent in the company; the founders, including their family members, collectively own 12.75 per cent.

In February, the board had approved Rao’s salary hike, introducing a higher performance-driven compensation that would be benchmarked to targets set by Chief Executive Officer 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 also doubted the board’s commitment to enforce the 2020 targets of Sikka. “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 in a mail to select news organisations on Sunday evening.

Murthy, who hired Rao three decades ago and helped elevate him to COO and to the board, said this was the time to demonstrate fairness in compensation that the company had practised since inception.

“Giving 60 to 70 per cent increase in compensation for a top-level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6 to 8 per cent is, in my opinion, not proper,” Murthy wrote. “This is grossly unfair to the majority of the Infosys employees... (from project managers to office boys) who are toiling hard to make the company better. The impact of such a decision will likely erode the trust and faith of the employees in the management and the board.”

Murthy’s fresh salvo on governance issues and the board since the February truce comes even as the company is investigating complaints against the acquisition of Israeli firm Panaya and the severance package for former chief financial officer Rajiv Bansal. In February, Murthy, who made his concerns over failing corporate governance at Infosys public, had asked for the resignation of Infosys Chairman R Seshasayee.  

Separately, a whistleblower had complained there were violations of company law, rules of the US Securities and Exchanges Commission (SEC), and the Securities and Exchange Board of India (Sebi) regulations in disclosures of payments to Bansal. 

Murthy on Sunday also asked Rao to check his conscience before accepting the increase in compensation. “With what conscience can a decent person like Pravin (a man schooled in Infosys values for over 30 years) tell his juniors that they should work hard and make sacrifices to reduce cost and protect margin? I have got so many mails from these people asking whether this resolution is fair. No previous resolution in the history of the company has received such a low approval.” Murthy, who has for long advocated for a reasonable gap in salaries of top management and junior executives, said it was the board’s responsibility to ensure fairness.

 “I have always felt that every senior management person of an Indian corporation has to show self restraint in his or her compensation and perquisites. He or she has to fight for maintaining a reasonable ratio between the lowest salary and the highest salary in a corporation in a poor country like India. The board has to create a climate of opinion for such fairness by their actions,” he said.