Moneycontrol BureauInfosys co-founder NR Narayana Murthy has spoken out on 'differences' with the board. In an interview to Network18, he questioned the high severance pay given to former CFO Rajiv Bansal. "Hope Bansal was not paid because he had any 'damaging information'", he added.
Murthy raised questions over Bansal’s severance payout, saying that paying a high exit package was not a standard practice in the industry. The company didn’t pay top executives such as Mohandas Pai, V Balakrishnan, Ashok Vemuri and BG Srinivas when they left the company, he added.
Many executives who left Infosys had insider information, why did the board pay only Bansal, he asked. There is a bit of consternation over the severance pay given to Bansal, he said, adding that such a high severance pay is not a normal practice.
After Bansal’s exit in October 2015, the company had issued a statement that read: “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 veteran came down hard on Infosys saying that the company needs to strengthen its remuneration committee. Besides, he said had they not received about 1,800 emails over governance issues at Infosys, he wouldn’t have been worried.
Murthy cleared the air on Vishal Sikka saying that he is "quite happy" with the Infosys CEO. He, however, added that the board's "governance could have been better". “We’re quite happy with CEO Vishal Sikka. He is doing a good job,” Murthy said.
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.
Infosys has said that 98 percent of Infosys shareholders were in favour of the move to revise Sikka’s compensation structure. “It was a postal ballot and every shareholder had an opportunity to vote. 98% of shareholders who voted, were in favour of the resolution,” Infosys said in a statement.Below is the transcript of Narayana Murthy’s interview to Vir Sanghvi.Q: Let me start by asking you about the current controversy. It has been suggested that you are unhappy for several reasons with the way in which the Infosys management is currently functioning. Can you tell me what those reasons are?A: First of all, let me make it very clear that it is not the management that concerns me. We are quite happy with Dr Vishal Sikka. He is doing a good job, he is a very bright person. However, what concerns some of us particularly the founders and senior, former Infosians is that there have been certain acts of governance that could have been better.Q: Give me some examples. A: For example, paying the former CFO a 30-month severance pay. (Note: Infosys has clarified that the pay amounted to a 24-month pay.)Q: That is after he left. He got a salary for 30 months after he departed, that is what you are saying?A: Yes.Q: Which amounted to how much?A: Rs 23 crore. (Note: Infosys says the amount is about Rs 17.38 crore.)Q: What was the argument for doing that?A: The Chairman said, at the annual general meeting (AGM) that he had some highly confidential competitive information, but anybody who knows our industry can quickly come to the conclusion that there are so many senior people in the company that have such competitive information that – in Infosys itself we have had two CFOs who left before and several other senior people who are on the board, senior vice presidents, etc. who had such competitive information and we did not pay any one of them.Q: Let me put this bluntly. You are going to dance around the subject, but what the market is that guy had the goods on you, he had damaging stuff on Infosys and they had to pay him off. A: I hope it is not the case, but we are all judged by our actions. In Kannada there is a saying, if you sit under a toddy tree and drink milk, people will think you are drinking toddy. So therefore, it is very important for us not only to do the right thing, but also to be seen doing the right thing. That is the whole issue. Q: Before we go further, I have to give you, in all fairness, what the board has said in response and they say that what they have done is standard industry practice. Is it?A: No, as Mr Mohandas Pai said this morning and it has been reported on the web that there is not other case in the history of corporate India in the last 50 years where a departing CFO was paid 30 months of severance pay. So, it is not that common.Q: Let us take the example of Mohandas Pai who was CFO at one stage. When he finally left Infosys, left with a degree of unhappiness that he had not been considered for the job of CEO because he was not one of the founders. Yet there was never there any suggestion that he needed to be paid off or that he would compromise Infosys. He left with the company’s best interest at heart.A: Yes, we did not pay him any severance pay. When Mr Balakrishnan left, we did not pay any severance pay, when BG Srinivas who was on the board left, we did not pay any severance pay. When Mr Ashok Vemudi who was on board left, we did not pay any severance pay. So therefore, there is a little bit of consternation as to why such a huge severance pay was paid.Q: That is not the only issue. It is not just about one CFO and how much he was paid. Your concerns run deeper.A: There was a former legal counsel who was paid 12-month severance pay. That again created a little bit of consternation. Overall, the issue is whether the remuneration and nominations committee and the board is actually spending adequate time on these issues. Are they asking questions like is this what happens normally in India or what will the world think of us if we pay such huge sums. Third, are we going to pay such huge sums to future key people that leave the company? What is the financial implication on the company, financial liability for the company? There are lots of questions that need to be asked before you come to a conclusion to change the policy from one of three-month severance to such a large sum. That is the issue.Q: One suggestion has been that the board of Infosys because it is now a prestigious thing to be on the board has generally been quite laid back and has not thought as deeply as it should have about the issues. Is that a fair criticism?A: I do not know because I am an outsider so it is not fair on my part to make any of those statements. All that I would say is looking at what comes out of the company, looking at the decisions they have taken, my fervent hope is that the board will exercise a higher level of due diligence before coming to conclusions on some of these issues.Q: You are, apart from being the founder of Infosys, you are still a large shareholder.A: Yes.Q: So, as a shareholder if not as a founder, what would you like Infosys to do differently?A: Basically I would say that they need to strengthen their remunerations and nominations committee. They have to prepare a checklist of questions in deciding the remunerations of any incoming key employee, the severance pay for any key employee who is leaving the company. They should look at the reputations of the company in every one of their actions and at the end of the day, they had to ask a very simple question, will this decision of ours enhance respect for the company. That is all. The moment you ask that question, a lot of these issues will get sorted out.Q: But that suggests they are not asking any questions at the moment. Is that what you believe?A: As I said, I am not part of the deliberations, therefore, I am not in a position.Q: You are saying they should do this. You would not want them to do this if they were already doing it that is self-evident, right?A: If they are doing it then I do not think we would have had a decision of the kind that we have seen. Q: Before I go on to larger issues of the tech industry in Infosys, let me ask you the uncharitable things being said about you which is that this is Ratan Tata syndrome, a man who walked away from an empire and said I do not care, I will concentrate on other things and now cannot bear to see the company being run without him. I am not sure if it is true of Ratan Tata, but that is the term.A: It is a fair question. I have been told by several industry experts that in the 150 years of corporate India, we the founders were the first group to voluntarily walk out from the company after founding it and nurturing it for 33 years, creating a cash pile of about Rs 30,000 crore, taking the market capitalisation to about Rs 2,00,000 crore, taking the revenue to about USD 8.7 billion, taking the net income to about USD 1.8 billion, creating 32 million sq ft of office space plus another seven progress. And this is, according to my friends, not a mean achievement and there is no other case where people have walked off from the company. None of us continued on the board of any of these companies.Q: The suggestion is that you now having, not quite seller’s regret, but walker away’s regret, that having walked away, seeing the company doing well, you are actually not that happy, you want to interfere and run it.A: If we had not seen the kind of things that happened, if I had not received 1,800 emails, from employees, from various investors, from the public.Q: 1,800 emails is what you have received?A: Yes, about the severance pay, some of the other governance issues, I would have had no worry. For example, when Mr KV Kamath was the Chairman of the company, there was not a single time when I even called him on any of Infosys issues. There was not a single he had to update me on any issues.
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