Bengaluru: Infosys Ltd paid ₹ 23.02 crore severance pay, salary and other benefits to former chief financial officer (CFO) Rajiv Bansal last year, drawing criticism from proxy advisory firms and analysts for awarding an unusually high compensation to an outgoing executive.
That compares with the ₹ 4.72 crore Bansal earned in the previous year at India’s second largest software services firm.
For approximately six months from 1 April to 12 October 2015, Bansal earned a gross salary of ₹ 1.31 crore, according to the firm’s latest annual report. In addition, Bansal was paid ₹ 21.71 crore by Infosys, which the company said includes severance package, bonus, retirals and others on accrual basis, for a total compensation of ₹ 23.02 crore.
Experts said that an outgoing CFO getting an unexplained sum does not reflect well on corporate governance.
Infosys claimed that this compensation reflects the “enhanced non-compete and non-disclosure agreement" the company had signed with Bansal. Infosys declined to clarify what this enhanced non-compete agreement means or how much the severance component was.
Mint could not independently ascertain the reason why the management paid this sum to Bansal.
Bansal, who joined Infosys in October 1999, resigned on 12 October 2015 and left the company at the end of last year to join as head of finance at ride-hailing service Ola, run by ANI Technologies Pvt. Ltd.
“The compensation package of Rajiv Bansal, as outlined in our annual report includes fixed pay, performance bonus and long term bonus. In addition, at the time of his exit, the company has signed an enhanced non-compete and non-disclosure agreement which includes a severance package, to be paid over a period of time," said an Infosys spokesperson.
Infosys did not give out any severance package in the past to former CFO V. Balakrishnan or former head of finance T.V. Mohandas Pai. The company also did not give a severance package to its then head of Infosys BPO, Gautam Thakkar, and to the division’s head of finance, Abraham Mathews.
In November 2014, Infosys asked Mathews to leave the company after the management found that a few employees at the Infosys BPO facility at Brno in the Czech Republic had overstated man-hours for customer support work done for Apple Inc. Thakkar left the firm, taking moral responsibility.
Experts also criticized the fact that Infosys did not disclose the severance package when it announced Bansal’s resignation on 12 October and instead chose to mention it in its annual report.
“It is unusual for a company like Infosys that proffers transparency, to have not made this public at the time of departure of its executive and rather disclosed it quietly in its annual report," said Shriram Subramanian, founder and managing director of investor proxy firm InGovern Research Services. “It does not reflect well."
Analysts are seeking more clarity on the details of the payment to Bansal.
“We did ask the management but they just said it was part of enhanced non-compete agreement, declining to share details," said a Mumbai-based analyst at a foreign brokerage. “We understand that as business becomes more tricky and competitive, you may want to have a stringent non-compete clause. But then please clarify why you are paying money to your outgoing CFO as it never is a good development when a company pays money to its outgoing CFO. Now, is this severance pay an one-off or will it become the norm. We don’t know."
A few executives at Infosys concede that this is the first time it has paid out this kind of money, but declined to spell out the reason.
“I’ll agree it is probably for the first time we have paid this severance package," said an executive, declining to be named.
“I’m sure the board went into the details and concluded that it will be only correct to pay this compensation," the executive said, declining to share details.
An email sent to Professor Jeffrey Sean Lehman, independent director and the head of the remuneration and nomination panel at Infosys, seeking comment, went unanswered.
Bansal also did not respond to a text message seeking comment.