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Business News/ Companies / News/  Infosys strongly defends COO pay hike criticized by Narayana Murthy

Infosys strongly defends COO pay hike criticized by Narayana Murthy

Infosys defends the hike in the compensation of its COO U.B. Pravin Rao in the face of criticism from founder N.R. Narayana Murthy

Infosys says it will continue to work with all stakeholders to ensure long-term interest of the company. Photo: ReutersPremium
Infosys says it will continue to work with all stakeholders to ensure long-term interest of the company. Photo: Reuters

New Delhi: Infosys on Monday vehemently defended an over 33% pay hike for its COO, saying it is in line with global standards, even as former executives V. Balakrishnan and T.V. Mohandas Pai joined co-founder N.R. Narayana Murthy in criticising the move.

The country’s second-largest software services company said the increase in U.B. Pravin Rao’s salary followed a comprehensive survey of best practices and benchmarked senior management compensation with key Indian and global companies. The eruption of a fresh row between some founders and the top management saw the stock take a beating with a fall of over 1% in an overall bullish market.

The company claimed that the net hike for Rao came to just 1.4% for 2017-18 after accounting for a four-year vesting period of stock, a 10.6% drop in cash component and performance-based pay going up to 63% from 45% of total compensation.

“This (hike) could go up to 33.4% in year 4, assuming similar grants are made in subsequent years based on company and individual performance," Infosys explained. Soon after shareholders voted for Rao’s pay hike, Murthy opposed the proposal saying near “60% to 70% increase in compensation" to the COO is “not proper" when most employees got just 6-8% hike.

ALSO READ | Infosys shares fall 1% after Narayana Murthy slams COO Pravin Rao’s salary hike

“This is grossly unfair to the majority of the Infosys employees," he had said. “The impact of such a decision will likely erode the trust and faith of the employees in the management and the board." Murthy had abstained from the resolution on raising Rao’s salary. Only 24% of promoter shares voted in favour of the resolution while the rest abstained. The proposal was placed before the shareholders and the recommendations have been approved by 67.5% of them while 32.5% voted against the proposal. Among non-promoters, 24.5% institutional investors and over 67% non-institutional shareholders voted against the proposal.

Infosys said the revision that has been rolled out for several members of the senior leadership team is “focused on making Infosys more competitive, is benchmarked against peers" and is critical to retaining key talent. The fresh rift comes barely two months after a similar face-off between the founders and management on issues like CEO salary hike and severance package to former employees.

Infosys said it viewed Murthy’s statement as “important feedback" and will continue to work with all stakeholders to ensure long-term interest of the company. Explaining the increase, Infosys said the cash component of Rao’s package had decreased by 10.6% to Rs4.6 crore from Rs5.2 crore. Former Infosys executives like Balakrishnan and Mohandas Pai have rallied behind Murthy.

The executives, who were part of the leadership team for a significant part of their careers, highlighted that there are corporate governance lapses at Infosys that need to be checked. Balakrishnan, who served as CFO, said there was a need for reconstituting the company board as the golden standards of governance and value system that Infosys was known for, are “being decimated under the current leadership".

Pai, on his part, said since Infosys is an Indian company, it should follow Indian standards for compensation. Murthy, along with Balakrishnan and Pai, has previously publicly aired his views on what he refers to as falling governance standards at Infosys. In February, Murthy had questioned the steep severance payments made to former employees, Rajiv Bansal and David Kennedy, asking if the same was “hush money".

The tussle also saw whistleblowers sending letters to market regulator Sebi alleging irregularities in Infosys’ $200 million acquisition of Israeli firm Panaya. The company, however, had refuted all allegations, saying these are “misleading". Sikka and Seshasayee had also called a press conference to explain the company’s stand on the issues pointed out by the promoters.

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Updated: 04 Apr 2017, 01:28 AM IST
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