Infosys Ltd recording an industry-leading growth of 13.3% in constant currency terms (9.1% growth in dollar revenue) for the financial year 2015-16 has certainly pleased the company’s board, which decided to reward chief executive officer Vishal Sikka with an extra Rs.1 crore.
Sikka, who took over as the first non-founder CEO of Infosys in August 2014, stood to earn up to $7.08 million. This included $900,000 in base salary, $2 million in restricted stock units, and $4.18 million or Rs.28 crore in variable pay. Infosys’s growth surpassed the internal growth targets set by the board for the financial year ended March 2016, and hence, Sikka earned $4.33 million or Rs.29 crore in variable pay, according to an executive who spoke on condition of anonymity.
“The nominations committee recommended a higher variable pay and it was approved in the board meeting on 16 April,” said the executive, who declined to share details.
The Infosys board had linked Sikka’s variable pay to the performance of the company’s growth although, for now, it is unclear what internal targets the board had set based on which Sikka earned the extra buck. Although Infosys managed to beat its own revenue guidance of at best 13.2% in constant currency terms, its revenue growth in dollar terms was a notch below its estimate of 9.3%. Constant currency excludes any impact of currency movement while the dollar revenue growth is the money it generates based on the business a company does in a period.
Infosys declined to offer a comment.
Beginning 1 April this year, Sikka will be paid up to $11 million a year, after the Infosys board in February decided to raise his compensation by 55%, and extend his term as CEO until 2021. Under the old agreement, Sikka was to be at helm of Infosys until 13 June 2019.
The board credited Sikka with putting India’s second largest software services firm back on the growth path and hence raised his compensation and gave him time to help Infosys realise its goal of becoming a $20 billion firm by March 2021. For this reason, 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, and depend on Infosys keeping up with its stated goal of becoming a $20 billion company.
However, the terms of this new agreement did not go down well with some of the promoters/founders of Infosys, according to two executives, and for this reason, many abstained from voting in favour of a resolution to reappoint Sikka as CEO until 2021.
Only 23.57% of promoter votes were cast in favour of a resolution reappointing Sikka as the managing director and CEO. 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.
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. Together, the promoters of Infosys had 13.07% stake in the company as of 31 December.
None of them have responded to Mint’s multiple requests seeking an explanation.
On Friday, Sikka said in an interview that he is not perturbed by the decision of some of the promoters expressing their displeasure by not voting for the resolution.
“I’m not disappointed. I don’t care. I have 100% backing of the board and support from the shareholders,” Sikka said after Infosys, which ended March 2016 with $9.5 billion in revenue, said that it expects dollar revenue to expand between 11.8% and 13.8% in the year to 31 March 2017.
“I still respect the founders. Why they did this, you should ask them,” said Sikka.