Infosys CEO justifies COO Pravin Rao's compensation

Bengaluru: Less than two months since the face-off between Infosys founding father NRN Murthy and management led by CEO Vishal Sikka, on hiking the salary of the CEO and the severance package to a key former employee, a fresh row has erupted between the two sides, this time over COO U.B. Pravin Rao's compensation.

A day after co-founder and former chairman N.R. Narayana Murthy lashed out, calling the pay hike to Mr Rao as "grossly unfair", as a majority of Infosys employees get only a 6-8 per cent annual hike, Infosys, on Monday, strongly defended its decision to hike compensation to the COO.

Vishal Sikka, the CEO of Infosys, in the statement, said that Mr. Rao's partnership over the past three years has been critical to the success and growth of the company.   

"It is essential for us to see that this revision in his compensation, as with several of our senior leadership team, is focused on making Infosys more competitive, is benchmarked against peers, is critical for us to retain key talent and aligns the long term interests of our leadership team with that of our shareholders," Mr. Sikka said.

Infosys addressed Mr. Murthy's concern and justified the over 33 per cent rise in Rao's compensation. "The Infosys Board acknowledges the sentiments of shareholders who have not voted in favor of the resolution, and has also taken careful note of the statements expressed by the company's promoters. This Board views this as important feedback as it continues to work with all stakeholders to ensure the long term interests of the company," Mr. Sikka said.

 Shedding light on some of the details, which were disclosed in the stock exchange filings on October 14, 2016, the statement said, "The cash component of his compensation has decreased from Rs. 5.2 crores (including annual cash bonus) to Rs. 4.6 crores, a decrease of 10.6%." Mr. Rao's performance based component of the compensation-based on company and individual performance-has been increased from 45% to 63% of total compensation.

"Given the 4 year vesting period of stock, the net increase in Mr. Pravin Rao's compensation for FY 18 will be 1.4%. This could go up to 33.4% in year 4, assuming similar grants are made in subsequent years based on Company and individual performance," said the statement.

67 per cent shareholders back hike
Infosys states that over 67% of Infosys' shareholders have approved the revised compensation proposal in a postal ballot, which was disclosed by the company on April 1, 2017. In the modified compensation structure. it is only the performance-based portion that has been raised to 63 per cent from 45 per cent of the total compensation, while also introducing higher stock incentives, which can be vested over a period of four years. "It was rolled out for the entire senior leadership including Mr. Pravin Rao, Chief Operating Officer," said the company.  

‘No proper justification’
Insiders familiar with the row between the founders and have said that the Board has not given a proper justification to Mr. Murthy about Mr. Sikka's salary hike and hence, the IT veteran has, once again, questioned Mr. Rao's pay hike. In an email written to the media, Mr. Murthy spoke of the poor corporate governance, and unjustified fat pay checks given to the top management personnel at Infosys. He expressed his disagreement over the top management's decision to increase Infosys COO U.B. Pravin Rao's compensation by 35% to Rs 12.5 crore.