N R Narayana Murthy wants NYU's Marti Subrahmanyam on Infosys board: Report

Murthy is sticking to his guns when it comes to his allegations of a fall in corporate governance

Infosys co-founder N R Narayana Murthy told a financial daily that the software giant needs to bring in Marti Subrahmanyam, who is a professor at New York University's Stern School of Business, as co-chairman in the board and appoint DN Prahlad, an independent director with the firm, as the chair of the nomination and remuneration committee.  

 Speaking to The Economic Times, Murthy questioned the large severance package offered to the company's former chief compliance officer David Kennedy and former chief financial officer Rajiv Bansal. He also raised objections over Chief Executive Officer (CEO) Vishal Sikka's compensation package. He also sought the replacement of independent director Jeffrey Lehman as the head of the nomination and remuneration committee.

Murthy's exclusive interview to the financial daily comes even as Infosys' board of directors has appointed law firm Cyril Amarchand Mangaldas to engage with the company’s founders over concerns raised by the latter on disclosures and transparency. The law firm, along with corporate governance experts, is to recommend to the board the next steps. (Read more)

No split with Sikka

According to Murthy, Sikka generally requests for some of his time when the latter is in India, and the two usually meet at the former's house to talk over a shared meal.  

In the interview, Murthy made it clear that while he had spoken to Sikka since voluntarily leaving the company in 2014, their discussions have always been centred around technical topics. Calling Sikka "a rare technocrat", Murthy made it clear that neither had he ever sought to advice Sikka on how to execute strategy as the CEO of Infosys, nor had Sikka ever sought his advice on such matters. Further, none of the founders had sought to intervene in Sikka's duties. Murthy asserted that Sikka had been given a free hand and that the culture at Infosys ensured that predecessors have always wished for the best for their successors.

Sikka's salary package unacceptable

While Murthy asserted that there was no personal split between the founders and Sikka, one of the original concerns raised by the founders had been the high pay package offered to Sikka. This topic of contention came up in the ET interview too. 

Murthy explained that in developed countries, companies with good governance have a 1:2 ratio between the CEO's salary and the salary of the employee at the next lower level. At Infosys, Murthy said, the difference between the CEO's salary and that of the entry-level salary for a software engineer stands at 2000 times. Stating that capitalism is still nascent in India, Murthy said that it was the responsibility of the "leaders of capitalism" to ensure that these ratios are even lower. This is one area where Murthy has pushed for a change, stating that the chair of the nomination and remuneration committee and the chair of the board have a huge responsibility when it comes to such things. Further, keeping with his views on the topic, he sought the replacement of Lehman as the head of the nomination and remuneration committee.

The problem of large severance packages

The founders have also highlighted the issue of large severance packages offered to departing high-level employees, particularly Bansal and Kennedy. Murthy brought up the issue during the interview, stating that such large packages smacked of some irregularity, and would look like "hush money" to outside observers. "Providing huge severance pay (with 100 per cent variable) to some departing employees while giving only 80 per cent variable for employees in the company is one such example," Murthy told ET. Further, Murthy said that terming such high packages as "generosity", even if nothing objectionable had taken place, would only appear to be "arrogance towards honest employees, total lack of fiduciary responsibility, and an unbelievable lack of application of mind". 

However, as reported earlier, Infosys' board has underlined that the majority of shareholders had approved on the concerns raised by the founders, such as Sikka’s pay, and the severance packages to Bansal and Kennedy. (Read more)

The responsibility for what he sees as a lapse in good governance lies with the chair of the nomination and remuneration committee (Lehman), according to Murthy. In the interview, Murthy said that Lehman should have convened a meeting to discuss the prevailing practice of the company in the matter of paying huge severance pay and checked whether there was any special need for moving away from that policy. Further, Lehman should have looked at its impact on the reputation of the company, its impact on employee morale, and the future financial liability for the company. After that, according to Murthy, the committee should have voted against any such huge severance package. 

The way forward

Speaking to ET, Murthy said that the R Seshasayee, the chairman of the board, and Lehman, in his capacity as the head of the nomination and remuneration committee, should accept their mistakes. 

Murthy also said that the company needed to follow the "good practices of pre-2014 Infosys and improve upon them". He said that the board needed to consult experts like Marti Subrahmanyam, Omkar Goswami, Mohandas Pai, V Balakrishnan, Nandan Nilekani, Kris Gopalakrishnan, SD Shibulal, Sharad Hegde and K Dinesh.

Murthy's prescription for the what he viewed to be the current issues ailing Infosys was to bring in former Infosys employees, who have been "schooled in the Infosys values", in various capacities. Particularly, though, he suggested that Marti Subrahmanyam needed to be brought in as co-chair in the board.