What Vishal Sikka should have done to avoid Infosys conflict

Infosys CEO Vishal Sikka should have offered to reduce his compensation package, which was hiked by the Board by 55 per cent, to $11 million, last year.

Such a proffer would have made a socialistic impact than a perception of capitalistic greed among the shareholders, says Gurucharan Das.

Had Sikka done so, founder Narayana Murthy would not have had to go to the press to express his anguish.

The CEO held a media meet on Monday evening in Mumbai to clear doubts regarding governance issues raised by promoter-directors at the company, headed by Murthy, Mohandas Pai and Balasubramanian.

It would have been the ultimate manifestation of loyalty and in the larger interest of Infosys, something that Murthy would have loved.

The more Sikka, or other members of the present Board, including the non-executive chairman Seshasayee, display such ideals to the shareholding public and to the world, the better it will be for Infosys and for us all, says an expert.

The flashpoints made in Monday's press conference called by Sikka and Seshasayee were:

1) The severance package offered to CFO Rajiv Bansal was a miniscule sum considering the position of Infosys. In fact, only Rs 5.2 crore was paid and the balance payment has been suspended since April 2015 and the reasons for the suspension have been explained.

2) The compensation package offered last year to Sikka, though $11 million, is not a fourth of what middle-level managers get at Google and other companies in that bracket. Comparing industry norms, Sikka's salary is linked to $20-billion revenue target by 2020 and hence higher variable pay. ($20-billion is a 30 per cent higher, unrealistic and foolish upward revenue projection, especially in the wake of Donald Trump’s counter-immigration policy announcements and damp market conditions, says Murthy.)

3) The appointment of Punita Sinha, who was married to Union minister for civil aviation Jayant Sinha, is not a new practice and there is precedence of such appointment earlier.

4) The present Board has appointed an attorney firm to go into the matter of compensation, pay and nomination matters to demonstrate the transparent approach followed in these decisions.

5) This is the sore point, according to many. Infosys has enough to pay as dividend to promoters or a buyback of their equity if they refuse to see the reason behind the actions of the CEO and the present Board which ratified the actions.

6) In the eyes of the Board, the promoters and other shareholders are equal.

While it may be a fact that for a company the size of Infosys, the severance pay-out to Bansal or the revised package of Sikka may not be big at all, the point made again and again is why there was no transparency when these decisions were made.

Why were the objections raised by the Board over the Panaya acquisition not addressed.

Why was the rule book of Infosys jumped regarding compensation, severance and nomination or in other words, why was the handbook of norms bulked up with changes and never brought to the notice of the founder director?

Do other dogged former workers of the company - promoter directors like Nandan Nilkeni, Mohandas Pai, Krish Gopalakrishnan and V Balasubramanian, though having only 12.75 per cent equity collectively - not deserve anything more than their inputs merely to be considered within the framework of the Board?

Is Murthy’s claim not reflective and representative of what a normal shareholder in the company will also be concerned about? How is it different? 

Who are these other stockholders whose interests are unlikely to be any different from Murthy that the Board wants to defend in proxy?

Though key stakeholders, including Murthy, Sikka and chairman Seshasayee claim a truce, analysts say this is far from the truth.

Conciliatory remarks by Murthy and flattering ones about Murthy and Infosys by Sikka and reassurance by the always-proper Seshasayee in the press conference all look too good to be true.

"I can’t assure you anything, Mr Murthy and I have spoken and I hope something like this doesn’t happen again," said Seshasayee. He added that the promoters will not be treated specially over other shareholders.

He further concluded that there is no "negotiated formula” and the Board will treat the founder and the normal shareholder alike.

This isn’t the clear message everyone is expecting to hear, although it may be all you get for the moment.

However, both parties have realised the need for some compromise, meaning some demands of the founders be met and at the same time the current management run Infosys the way it wants to, without having to be watched over its shoulders.

But the most intriguing thing after the meeting of the Board in the press room instead of the Board room is that people don’t know if a compromise has been reached yet.

Let us wait and watch.

Also read: Will Infosys be able to resolve Murthy-Sikka spat before it's too late?