V Balakrishnan has stated that the company has still not clearly articulated the targets which are to be achieved to receive the compensation
Former Infosys board member V Balakrishnan has questioned the 55% salary increase of CEO Vishal Sikka, stating that the company has still not clearly articulated the targets which are to be achieved to receive this compensation. The board revised Sikka’s total compensation from $7.03 million to $11 million, of which the variable component goes up to $8 million. Sikka received a total compensation of $7.3 million for FY16.
“There should be transparency in payment to the CEO and linkages should be clearly visible to shareholders; if the board makes any deviation from the linkages this should be clearly articulated to the investors,” Balakrishnan told FE on Wednesday.
The steep increase in Sikka’s compensation has been one of the three main points raised by Infosys founders led by N R Narayana Murthy. There is also the thinking that such an increase is not justified given the current IT business scenario, expected to grow in single digits.
However, Infosys chairman R Seshasayee defended the compensation paid to Sikka on the grounds that it is tied to a very high level of targets. He further went on to say that even though the compensation was raised to $11 million, the fixed component was down to $4 million from $5.08 million earlier.
Balakrishnan said the Infosys board should articulate to the shareholders the year-wise target for the CEO. “The board has to make sure that the CEO’s salary increase clearly enhances shareholder value,” he remarked.
At the same time, there is no clarity on the targets Sikka will have to achieve to receive this compensation. Though a certain section of the shareholders believe that given the performance of the company in the current fiscal, it is unlikely that Sikka will receive the variable component of the salary.
Infosys, when it enhanced the compensation for Sikka, justified it on the grounds that the company has already begun to show results under his leadership and goals have been drawn in terms of achieving $20 billion in revenue by 2020 with an operating profit margin of 30% and revenue per employee of $80,000.
At an investor call on Tuesday, R Seshasayee, in response to a query on the linkages of compensation to the $20 billion target, said, “There is a flexibility to the board to balance between the motivational need of the CEO on the one hand and fidelity to the trajectory which was originally agreed for this rather ambitious target.”