Vishal Sikka, who had joined Infosys three years ago in 2014 from SAP, said that he is resigning from Infosys on the account of rising personal disruptions as founder Narayana Murthy’s attacks on the company management over corporate governance continue to grow. Vishal Sikka said that 100s of hours were spent on tackling drumbeat of distraction and that the attacks undermined the good work done by the company. UB Pravin Rao will serve as the interim MD & CEO of Infosys.
Here we take a look at the series of issues in the corporate governance since the start of 2017:
Recently in June 2017, India’s bellwether information technology services company’s original founders are looking to sell their entire 12.75% equity stake and sever their all ties with the firm after a bitter feud with the current management over corporate governance. But the company denied the news report that the original founders are planning to sell their entire 12.75% equity stake and sever their all ties with the firm after a bitter feud with the current management over corporate governance.
The Times of India reported that founders N R Narayana Murthy, Kris Gopalakrishnan, Nandan Nilekani, S D Shibulal and K Dinesh are planning to cut all their ties with the company they founded back in 1981, which went on to become the flag-bearer of Indian IT success story, as they are unhappy with the way the management led by CEO Vishal Sikka and the board led by Chairman R Seshasayee have operated Infosys after the founder exited three years ago.
“Infosys would like to clarify reports in the media speculating on plans of stake sale by the promoters. This speculation has already been categorically denied by the promoters. The company further reiterates that it has no information on any such development,” the company said in a statement issued on Friday morning to quell investor fears. However, there was no word yet from any of the founders themselves.
The board of Infosys sought to reinforce its position in the ongoing high drama about corporate governance at the company, by laying threadbare its responses to all the issues recently raised by the founders, including CEO Vishal Sikka’s compensation, former CFO Rajiv Bansal’s severance pay, and appointment of independent directors.
Earlier this year, non-executive Chairman R Seshasayee, in the first press conference since the news of the rift between the founders and the company management and board broke, tried to dispel all the allegations of misgovernance, saying that compensation of CEO Vishal Sikka was fixed on the basis of the global benchmarks, and that the appointment of independent directors Punita Kumar Sinha and D N Prahlad did not violate any corporate governance norms. However, the company, for the first time in the ongoing tussle, admitted that it might have erred in awarding a high severance package to ex-CFO Rajiv Bansal.
“Sikka’s package came with very ambitious targets,” Seshasayee said, adding that the compensation package for the CEO appointed in 2014 was finalised in line with the best global standards. The package included components to promote Sikka’s longevity in the company, which is essential to an organisation, and motivation to lead the company towards its ambitious goals, Seshasayee said. He added that the fixed component in Sikka’s compensation was trimmed to $4 million from $5.8 million, with the remaining portion of the revised package consisting of variable components.
Kiran Mazumdar Shaw, an independent director on the board of Infosys Ltd, struck a cautious note while lending her support for the CEO Vishal Sikka, amid the continuously developing story about corporate governance concerns raised by the founders over three executives’ high salaries and severance pay. Shaw, who is the Chairman and Managing Director of India’s largest biotechnology company Biocon, said in an interview to CNBC TV18 that Infosys founders want Sikka to deliver on his ‘lofty goals’. She told CNBC TV18 that she does not think that Vishal Sikka has an aggressive acquisition strategy.
In February 2017, Infosys Ltd said that the pay hike to the CEO Vishal Sikka was approved by shareholders and was voted favorably by founder Nandan Nilekani, refuting the founders’ concerns about three executives’ high salaries and severance pay, ET Now reported amid the continuously unfolding high drama over corporate governance. The company took the precaution of obtaining shareholder approval before implementing CEO compensation, ET Now reported citing unidentified company sources. Nandan Nilekani, one of the three founders who have raised the concerns, had voted in favour of the CEO pay, ET Now report added.
In January 2017, Infosys founders N R Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani wrote to the board expressing their concerns over corporate governance with the board, including the quantum of salary hike given to the CEO Vishal Sikka and the size of the severance packages given to two former executives. On its part, Infosys said that it had already addressed concerns about executive pay, and that “all decisions have been made bona fide in the overall interest of the company” and that full disclosures had already been made.