Bengaluru: The promoters (and co-founders) of Infosys Ltd do not seem overly happy with the decision of the company’s board to grant a two-year extension till 2021 to chief executive Vishal Sikka.
He was appointed CEO in 2014 for a five-year term.
According to filings by Infosys with stock exchanges, and information on the company’s website, only 23.57% of promoter votes were cast in favour of a resolution reappointing Sikka as the managing director and CEO.
Together, the promoters of Infosys had 13.07% stake in the company as of 31 December.
Only five of the seven original co-founders, N.R.Narayana Murthy, Nandan Nilekani, S.D. Shibulal, Kris Gopalakrishnan and K. Dinesh are categorized as promoters of the company.
The resolution was one of five Infosys sought to pass through electronic voting or postal ballots by 31 March.
To be sure, the reason why the promoters chose to abstain from voting for this resolution is not clear. None of them responded to emails seeking an explanation.
Interestingly, the promoters voted overwhelmingly in favour of three of the other resolutions (two dealt with a stock incentive plan and a third was on reappointment of Jeffrey Lehman as independent director). On a fifth resolution, the appointment of Punita Kumar-Sinha as an independent director, again, only 23.57% of promoter votes were cast in favour.
Two Infosys executives, who asked not to be identified, claimed the promoters may have abstained from voting in favour of Sikka’s reappointment to indicate their displeasure at the terms.
In February, the Infosys board decided to reward Sikka with a 55% rise in compensation, to $11 million.
“It’s more a vote on the higher compensation than the reappointment,” said one of the executives.
The board tied Sikka’s higher compensation to the company’s performance, as $5 million of his new compensation is to be paid in stock options, which will be paid depending on Infosys’s performance in keeping up with its stated goal of becoming a $20 billion company by calendar year 2020.
An Infosys spokesperson did not respond to an email seeking comment.
Infosys shares are up nearly 44% since the firm appointed Sikka as its first non-founder CEO with effect from 1 August 2014. The company is expected to end fiscal 2015-16 with revenue growth of at least 9% in US dollar terms, higher than the growth at Tata Consultancy Services Ltd, India’s largest software services exporter.
Strangely, the promoters’ decision to stay away from voting on these two resolutions is contrary to recommendations to shareholders by proxy advisory firms. None had problems with Sikka’s extension and Sinha’s appointment. In March, Institutional Investor Advisory Services (IiAs) and Shareholders Empowerment Services (SES) recommended shareholders vote against the management’s decision to reappoint Lehman as an independent director. Both IiAS and SES said that the Companies Act, 2013, had set independent directors’ tenure at a maximum of 10 years (two consecutive terms of five years each), and pointed out that Lehman will be completing 10 years as independent director in April. However, the Infosys board said that new Act came into effect only from 1 April 2014, and for this reason its decision was in “compliance with the requirements of the Companies Act” and Securities and Exchange Board of India regulations.