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Pravin Rao's pay hike fair, want Murthy to list governance woes at Infosys: Experts

Corporate governance and proxy advisory firms Stakeholders Empowerment Services (SES) and Institutional Investor Advisory Services (IIAS) do not resonate with Narayana Murthy's views.

April 04, 2017 / 01:00 PM IST
N. R. Narayana Murthy, founder and chairman of Infosys, listens to a question during an interview with Reuters at the company's office in Bangalore February 28, 2012. Picture taken on February 28, 2012. REUTERS/Vivek Prakash (REUTERS - Tags: BUSINESS SCIENCE TECHNOLOGY PROFILE HEADSHOT) - RTR30CV2

N. R. Narayana Murthy, founder and chairman of Infosys, listens to a question during an interview with Reuters at the company's office in Bangalore February 28, 2012. Picture taken on February 28, 2012. REUTERS/Vivek Prakash (REUTERS - Tags: BUSINESS SCIENCE TECHNOLOGY PROFILE HEADSHOT) - RTR30CV2

Infosys Founder NR Narayana Murthy's letter to the media questioning the salary hike given to Chief Operating Officer (COO) Pravin Rao has once again raised concerns over corporate governance standards at the Bangalore-based company.

While the Indian IT sector is struggling with the rise of automation and various geopolitical issues like Brexit and H1-B visa row, wage hikes have been tepid in the industry.

Murthy in his letter has anguished over the fact that the phenomenal compensation hike for Rao doesn't reflect a fair and just system which rewards others employees with a meager 6-8 percent salary hike.

Reacting to this new debacle between the founders and Infosys' board, corporate governance and proxy advisory firms Stakeholders Empowerment Services (SES) and Institutional Investor Advisory Services (IIAS) do not agree with Narayana Murthy's views.

JN Gupta, MD, SES asked what the former CEO meant by the current poor governance standards at Infosys.

He wants Murthy could spell out the issues for the benefit of the investors.

"Does the fact that he and current board of Infosys are not on same page about poor governance? Is Mr Murthy’s view or opinion or desire amounting to gold standard of governance? Unless Murthy spells out his  parameters of poor governance, I am not ready to take it on face value," Gupta said.

On the issue of corporate governance Amit Tandon, Founder and MD of proxy advisory firm IiAS said, "I can't recall any governance issues at Infosys, unless Murthy spells it out that he has received some information; to the extent that he has not articulated it, it is very difficult for me to figure out what's going on."

Gupta further points out that five of the present directors were there during Narayana Murthy’s regime as well.

He questions whether these directors have lost their independence immediately after Murthy's departure and become stooges.

"I strongly feel that these independent directors should question Murthy in turn," he said.

When asked whether the pay hike was excessive, Amit Tandon said that there is this whole issue of excessive compensation, but this particular one does not qualify for that case.

He said that Pravin Rao is at a CxO position and the hike is in line with what other CxOs have been getting.

"He [Narayana Murthy] should not be second-guessing the management. They decided on a number, they took it to the shareholders and the shareholders approved at this stage," he added.

On Narayana Murthy's call for compassionate capitalism, Gupta said, "Expecting the same sacrifice that promoters made at the foundation stage from professionals at this stage of company is neither practical nor rational. Promoters were building a business for themselves, they were sacrificing the present cash earning for future potential capital gains. The current management is not in the same position."

"When he [Narayana Murthy] says he generously compensated his other co-founders by way of huge equity, does it not amount to disparity? If he was a votary of compassionate capitalism, then Infosys equity would have been dispersed with thousands of employees and not concentrated with a handful chosen few. Where was equality then? And today when Rao is given variable equity based compensation it amounts to poor governance?" he added.

SES fails to understand the motive of intervention on the part of Narayana Murthy, Gupta says.

"However, one thing for sure is that either Murthy or the current Board is hell-bent on destroying value that has been created. Further, whether the image of Infosys as Gold Standard of Corporate Governance was nothing but a halo created by Murthy and company, else how come with the same set of people with minor changes at board level the entire governance structure has crumbled?" he added.

Sidhartha Shukla

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