Chaitanya Gudipaty

Moneycontrol



In an indicator of discontent brewing at Infosys, its founders including NR Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani have raised with its board concerns over the governance of the company, according to people privy to the developments at IT major.

Governance concerns

In a letter to Infosys board in January, the founders had raised fresh concerns over governance, had suggested bringing in value-based people into the firm. More importantly, they had questioned the compensation given to Chief Executive Vishal Sikka, sources told CNBC-TV18. They also raised question marks over the severance packages given to former Chief Financial Officer Rajiv Bansal and General Counsel David Kennedy.

Sikka's compensation

In October 2016, the country’s second-largest IT firm had linked Sikka’s compensation to its aim of becoming a USD 20 billion company by 2021. Sikka’s annual compensation of USD 11 million is made up of a USD 3 million fixed salary and a USD 8 million variable component which is subject to Infosys the progress it makes in achieving its targets.

The Infosys board and Sikka have alignment in their views, according to sources. They said concern about Sikka's compensation misplaced, adding that the hike is more in optics. Besides, 98 percent of Infosys shareholders were in favour of the move to revised Sikka’s compensation structure, they said.

Severance packages

Severance packages given to former Chief Financial Officer Rajiv Bansal and General Counsel David Kennedy were also questioned by Infosys’ founders.

General Counsel and Chief Compliance Officer David Kennedy left the company in December. The Bengaluru-based company had then said in a statement that "Kennedy will receive aggregate severance payments of USD 868,250 plus reimbursements for COBRA (insurance) continuation coverage over a period of 12 months."

Bansal, who quit in October 2015, was handed a Rs 17.38 crore severance package. “The severance agreement is being administered in accordance with the contractual rights and obligations. Certain payments to Rajiv under the agreement have been suspended pending certain clarifications with regard to such rights and obligations,” the company” had said in a statement.

Sources privy to Infosys board who spoke to CNBC-TV18 on condition of anonymity said that there was generosity in the CFO’s severance and not impropriety. It is a dead issue and no investor has raised concerns over it, they said.

They also ruled out Sikka leaving the company. Sikka has no intention to separate with Infosys and the board has an excellent rapport with him, they told CNBC-TV18.



Also Read: Highlights: Infosys founders allege governance violations



Infosys statement

“With regard to the three instances mentioned in your mail related to Governance, the Company reiterates that these decisions have been made bona fide, in the overall interest of the Company, and that full disclosures have already been made thereon. The Board receives suggestions and inputs from various stakeholders, including Promoters, which are evaluated with due importance. The Company will continue to be guided by the overall interests of all stakeholders,” Infosys said in a statement in reply to CNBC-TV18’s emailed questionnaire on the reported divide between its founders and the management.

Expertspeak



Industry commentators advised the company to deal with bigger issues. The Indian IT industry is going through a lot of churn on the back of US President Donald Trump’s H1B visa policy.

Commenting on the news, Moshe Katri, Managing Director, Wedbush Securities said any difference between the board and founders/promoters should be resolved amicably. The board should look at what peers have done and learn from them, said Khatri.

Trip Chowdhry, Managing Director, Equity Research- Global Equities Research said he believes that the founders of Infosys are out of touch and are making the mistake of addressing the symptoms rather than attacking the issue. Infosys is living in the past and in fact the only hope for them is Vishal Sikka, he said.

The priority of founders should be India first, employees second and shareholders third, Chowdhry said.

According to Amit Tandon, Managing Director, IIAS, the fact there in an engagement between the founders/promoters and board is good thing. Matters like Bansal’s severance package are just a small pinprick, he said.

There are other big issues that the management needs to focus on like business model, transformation, etc, he said adding that Infosys needs to revisit these parameters.