BENGALURU: In a continuing skirmish between Infosys’ founders and the board of the company over how executives are paid, only 24% of the promoters voted in favour of a salary hike for chief operating officer UB Pravin Rao, with the rest abstaining, according to results of a postal ballot filed with the Bombay Stock Exchange on Sunday evening.
In a letter addressed to reporters, Infosys founder NR Narayana Murthy said the quantum of increase would erode the trust of the rank-and-file employees.
“Giving nearly 60% to 70% increase in compensation for a top-level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6% to 8% is, in my opinion, not proper,” Murthy said.
In October, Infosys said it was raising Rao’s salary to include a fixed compensation of Rs 4.62 crore and variable compensation of Rs 3.88 crore per annum.
Also Read: Narayana Murthy’s mail to media on COO salary – ‘With what conscience can Pravin tell juniors to make sacrifices?’
This was put to vote on February 23, and voting ended on Friday. The postal ballot also asked shareholders to vote on the appointment of DN Prahlad as independent director and to approve an amendment to the company’s Articles of Association to allow it to buy back shares.
Overall, Rao’s salary hike passed with 67% of votes cast being in favour of it. About 33% of the votes cast were against the raise.
The promoters have abstained once before. The percentage of promoter votes cast were about the same as those that were voted in favour of extending Infosys CEO Vishal Sikka’s employment last year.
About 74% of shares held by public institutional shareholders also voted on Rao’s salary. Of those, 25% were against the increase. Of the 46% of shares that were voted by public– non-institutional shareholders – 67% were against the increase. Murthy said no previous resolution of the company had received such a low approval. Over 90% of the votes cast were in favour of the other resolutions on the ballot.
Murthy, who is at the centre of a governance battle with the company’s board, said abstention of the majority of the promoter shares from the vote was not a reflection of his faith in Rao. “This abstention has nothing to do with Pravin. Those of us who have always stood for fairness in compensation and practiced it, right from the day Infosys was founded, will have to demonstrate it when needed. This is a time when it is needed. Nothing more and nothing less,” Murthy said in the email sent to reporters.
He said the quantum of Rao’s salary increase was unfair, compared to the wage hikes given to the rest of the employees.
“The impact of such a decision will likely erode the trust and faith of the employees in the management and the board. With what conscience can a decent person like Pravin (a man schooled in Infosys values for over 30 years) tell his juniors that they should work hard and make sacrifice to reduce cost and protect margin?” he asked.
Shriram Subramanian, managing director of shareholder advisory firm InGovern, said the founders were reiterating their stand on high compensation.
“They have been talking about this. They abstained on the vote last year as well. They are making their stand on high compensation very clear. The low vote count is a reflection of that,” Subramanian said. He added there was nothing further to be read into the vote tally.
Infosys founders have also previously questioned the salary being paid to Sikka, which was raised to $11million last year. The founders have also been unhappy with the idea that the board could ignore the fact that targets have not been met, to give Sikka a higher proportion of variable pay. Murthy raised that concern too, in his email.
“Finally, given the current poor governance standards at Infosys, let us also remember that these targets for variable pay may not be adhered to, if the board wants to favour a top management person,” he said. Infosys’ founders have been asking for changes to be made to the board’s remuneration committee, especially over the outsize severance given to former chief financial officer Rajiv Bansal.
In an interview to ET in February, Murthy said: “The primary responsibility for this lack of fiduciary responsibility lies only with the chair of the nomination and remuneration committee and the chair of the board. They must accept responsibility and atone for it.” He wanted Infosys to name Prahlad as the chair of the remuneration committee.