Infosys shares firm but tread cautious; read how the governance drama is unfolding

By: | Published: February 9, 2017 10:15 AM

Infosys shares were in green but were trailing firm markets after various news reports suggested that some prominent investors have stepped in to try and bridge differences between the company founders and its CEO.

News reports say that prominent investors have stepped in to try and bridge differences between Infosys founders and its CEO.News reports say that prominent investors have stepped in to try and bridge differences between Infosys founders and its CEO.

Infosys shares were in green but were trailing firm markets after various news reports suggested that some prominent investors have stepped in to try and bridge differences between the company founders and its CEO.

Infosys shares were up 0.38% at Rs 940. S&P BSE IT index was trading stronger, up 0.75% at 9,779.89 points. BSE Sensex was up 0.54% at 28.442.58 points, while NSE Nifty was up 0.5% at 8,812.8 points.

Infosys founders N R Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani wrote to the board last month 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.

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Amid the drama unfolding layer-by-layer, and concerns looming over Vishal Sikka’s future at the company, an investment manager at Aberdeen Asset Management Company seemed to provide some comforting news for him.

“We are glad to see the numbers improve under Sikka’s leadership,” Adrian Lim told ET Now in an interview today. “Sikka has managed to stabilise numbers at Infosys on revenues and margins,” Adrian Lim added.

Earlier last month Infosys reported that the company’s operating margin for fiscal third quarter at 25.09% rose by 0.2% from the previous quarter, but trailed its rival Tata Consultancy Services’ 26%. Further, the company maintained its nine-month (YTD) operating margin at 24.7%, about the same as the corresponding period last year. Infosys further said that it has maintained the YTD margin at 24.7% despite a 1.7% fall in constant currency pricing, due to increasing efficiencies.

Former chief financial officer Rajiv Bansal’s severance package amounted to Rs 17.38 crore, equalling his 24 month’s pay, Infosys said in a statement last year. In a January filing with the US market regulator, Infosys, which is also listed on Nasdaq, said former general counsel David Kennedy would receive severance payments of $868,250 and other reimbursements over 12 months.

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CNBC TV18 said that Infosys had linked CEO Vishal Sikka’s compensation to the company’s aim of becoming a $20-billion company by 2021. Sikka’s annual compensation of $11 million is made up of a $3-million fixed salary and a $8-million variable component, which is subject to achieving the targets.

Several media reports also suggested that the founders, who together have just about 13% shareholding in the company, want the board to guide the management better. They had reportedly suggested appointing a former executive on the board, which is understood to be aligned more with CEO Sikka’s views than that of the founders.

 

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