Infosys compensation row: Of executives, programmers and fairness
In IT firms such as Infosys, giving raises at the top many times the rate of the raises at the bottom risks creating an impression that those at the top are greedy opportunists
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Early in the morning of Monday, 3 April, serendipity sat me next to N.R. Narayana Murthy on a long transcontinental flight leaving Bengaluru. As the flight attendants handed out newspapers for the passengers to read while on the journey, I couldn’t help but notice that Murthy had made front-page news, this time for questioning the extent of the raise given to an executive at Infosys Ltd, the company that he founded over three decades ago along with a few of his junior colleagues. I turned to him and we began a conversation. I shall not focus here on the specific comments about Infosys, but there were several parts of the conversation that covered Murthy’s philosophy around topics that I have written about in this column before, and which provide insights into the character of the man.
Unsurprisingly, we spoke of the social issues being caused by the changes in the way corporations recruit and retain talent. We spoke of organizations such as TopCoder, now part of an Indian IT services firm after the acquisition of its parent by Wipro. TopCoder is a marketplace for computer programmers, who can get compensated for their work through this marketplace without ever having to be an employee of a services firm. It is like a taxi aggregator among programming firms.
I have written in this column before about how marketplaces like these can eventually change the construct of the employer-employee contract now prevalent among many firms and have also mused about whether unionization may be around the corner at some Indian IT services firms as the employer-employee relationship construct begins to disintegrate.
Murthy explained that there are circumstances where unions can play a pivotal role in ensuring equity. He said the fact that unions look out for employees’ welfare is inescapable, and proffered the example of the US. According to him, when unionization covered 35% of the American workforce, American labour was better looked after. Now that this figure has slipped to around 15%, the poor have become poorer as corporations and their leaders have followed an Ayn-Rand-esque view of “rational self-interest” and social Darwinism.
Pushing crumbs off one’s table and trusting that the aspiring classes in society will have enough is a sure recipe in fomenting labour class unrest, as the recent Brexit and US presidential elections have shown. Murthy’s opinion is that such unrest is also lying dormant and is barely beneath the surface in India, and that leaders of India’s capitalist revolution cannot afford to blithely ignore this.
We also spoke of the fledgling experiments with universal basic income (UBI) that have begun to pop up in various corners of the earth. UBI is essentially a dole paid out to every citizen, whether they are out of work or not, in a nod to the fact that relentless mechanization and automation will take away many people’s livelihoods in the near- to medium-term future.
While classical economics tells us that disruptive changes in labour mechanics such as offshoring and automation only cause a temporary loss in jobs before there is a “job shift” when people start to work in other fields of endeavour so that they may earn a living, the short-term pain caused by the original job displacement is undeniable. UBI is a well-meaning attempt to alleviate some of that pain.
It comes with the same plethora of problems around unemployment doles, but Murthy’s view was that societies have a responsibility to their underprivileged or displaced populaces and that he would welcome higher taxes on the IT industry that are meant to go directly to those whose jobs IT displaces. He said that the only society that is stable is one that is seen to be moving, however haltingly, towards an atmosphere of equity and fairness among all its members.
Leaders in the IT industry need to be seen as fair by the people under their command. Giving raises at the top that are 10 or even 20 times the rate of the raises being given at the bottom runs the risk of creating an impression that those at the top are greedy opportunists most interested in snatching what they can while the going is good. I have been part of a company where the boss raised his own salary by over 250%, leaving others in his second line like me to explain to the rest of the workforce that they had to make do with a 2% increase.
The rationale for the anaemic salary increase for everyone but the boss was that the firm had not reached its (internally set) earnings before interest, taxes, depreciation and amortization, or Ebitda, targets. As an aside, I am sure the boss’s new salary contributed to the company repeating this miss in the next year.
That year, even though my own compensation increase was also in the low single digits, I felt great discomfiture at having to justify and explain the boss’s salary increase, which the board had seen right to give him since “he could easily get another job in the industry paying just as much”. To paraphrase the Bard of Avon, all the mouthwash in India has not cured me of the ensuing halitosis from those conversations.
Recalling a time when the industry finally saw the light and banded together in the common interest to fight high levels of attrition when companies were blithely poaching talent from one another, I asked Murthy whether Nasscom or some such industry body could now be entrusted with this looming question of “fairness”. He was unequivocal that an ombudsman is needed.
Maybe it is time we allow ourselves to be policed.
Siddharth Pai is a world-renowned technology consultant who has led over $20 billion in complex, first-of-a-kind outsourcing transactions.