Bengaluru: Infosys Ltd has signalled its intention to significantly increase its share of business from digital technologies, build a stable management team and ensure a higher return for its shareholders with the board linking chief executive officer (CEO) Salil Parekh’s annual compensation to the progress the firm makes in each of the three metrics.

For the first time, the Infosys board disclosed the parameters on which the company will give the variable pay to Parekh. This, according to one proxy advisory firm, does assuage many of the shareholder’s concerns on CEO compensation. However, three executives—one Infosys employee and two executives from two executive search firms—said the company could do better by disclosing more details.

Parekh, who took over on 2 January for a period of five years and was given a joining bonus of Rs9.75 crore, stands to earn up to Rs16.25 crore in cash every year, which includes a fixed salary of Rs6.5 crore and a variable pay of up to Rs9.75 crore. However, his compensation includes two additional components as well. These are an annual grant of Rs3.25 crore in stocks, a third of which will be vested every year over the next three years, and an annual performance equity grant of Rs13 crore that will be paid at the completion of three years.

“The number of shares that will vest shall be calculated upon the CEO’s successful completion of three full fiscal years with the company, concluding on 31 March 2021, and will be determined by company’s performance on total shareholder return, quality of revenue and organizational capability building, as determined by the board (or its committee) in its sole discretion for the three-year period," Infosys said in a filing to the exchanges on 4 May.

This decision by the Infosys board, led by co-founder and non-executive chairman Nandan Nilekani, is a marked departure from the earlier board’s decision to link former CEO Vishal Sikka’s $11 million compensation to Infosys’ progress to become a $20 billion firm with an operating margin of 30% and revenue per employee of $80,000 by March 2021.

In the past, many, including some founders of the company, believed the ambitious plan was merely a pipe dream, and the higher compensation was just one of the many areas of discontent between Sikka and some of the founders, which culminated with Sikka resigning in August.

“This is a fairly sensible cocktail of metrics and I believe Infosys has done a reasonably satisfactory job," said Amit Tandon, founder and managing director at Institutional Investor Advisory Services (IiAS), a proxy advisory firm. “Most companies in the US work on the premise of total shareholder return. Again, chasing revenue for the sake of revenue may not be best approach and so it is heartening if the company is focusing on getting more business from non-legacy areas of work. But I can understand why the board is somewhat recalcitrant to share more granular details, especially where they are coming from," he said.

Still, Infosys’s non-disclosure on the weightage of each of the three parameters or if similar metrics will also be used for evaluating the performance-linked pay of other senior executives has at least three others executives, including two executives at the company, question if this is the best practice.

Infosys declined to offer a comment.

“These metrics are very vague where the board appears to have tried to address the concern but not taken the leap," said one executive. “The company (Infosys) has already outlined to share a large percentage of cash with shareholders under its capital allocation policy, so it is obvious that stock price will only improve. But we don’t know what the weightage of each of these components is," the executive said.

“We need greater clarity and just beyond these English words. A CEO’s job is to focus only on business metrics and so the focus has to be on revenue and profitability," said a second executive.

Infosys’ major rival, Nasdaq-listed Cognizant Technology Solutions Corp., discloses more details on the remuneration of senior management, including its CEO.

Cognizant’s revenue growth has a 50% weightage in the variable pay compensation of senior executives.

The firm’s non-GAAP income from operations carries a 40% weightage and company’s days sales outstanding or the time taken by Cognizant to collect cash on the invoices has the remaining 10%.

Close