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Infosys CEO Vishal Sikka falls foul with founder directors

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08 February 2017

Vishal Sikka, the first non-promoter CEO of Infosys, has come in the firing range of a section of the IT major's founders who find him "less than ideal" to lead the company into the next stage.

Founder shareholders of Infosys, including NR Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani have expressed disquiet over what they see as shifting values of the company.

They also have, over the past year, questioned the pay hike given to Vishal Sikka, the appointment of Punita Sinha, wife of union minister Jayant Sinha as an independent director and a large severance pay of Rs17.4 crore to ex-CFO Rajiv Bansal.

These differences have been simmering for a while now and in signs that the founders are losing control over the company they nurtured, the majority of the board led by chairman R Seshasayee is backing Sikka, according to reports.
 
The founders, together, own 12.75 per cent in Infosys, with N R Narayana Murthy and his family owning the largest share.

Infosys, however, defended its decisions as being bonafide and backed by appropriate disclosures. A company spokesman said all major decisions were taken after following suggestions and inputs from all stakeholders, including founders.

The company also defended Sikka's cash compensation saying that it has actually gone down and the seeming increase has been primarily in restricted stock units (RSUs) and stock options, and that these are directly linked to incredibly steep goals set by the company.

The goals, although, have not been made public, but Sikka is said to have laid out a stiff target of doubling company's revenue to $20 billion, raising operating margin to 30 per cent, and per employee revenues to $80,000 by 2021.

The company also tried to defend the appointment of Punita Sinha saying that besides being wife of the union minister she is also eminently qualified for the job.

On the huge severance packages to Rajiv Bansal, the defence is that the company needs to move to international standards in pay and perks.

Apart from Bansal, two others - Michael Reh, an executive VP, and David Kennedy, legal counsel - were also paid substantial severance packages when they quit.

Infosys has said the employment contracts of key members of the executive management team include a severance clause. ''Such clauses are guided by the complexity of the role as well as country-specific regulations,'' it has said.

Ever since he took over in August 2014 Sikka has been focusing on improving employee morale, innovation and moving up the value chain. He has maintained that the existing IT business model of application development and maintenance, infrastructure management and BPO are slowing and the margins are falling and that companies need to innovate and offer value-added services.

Infosys before Sikka has mostly stayed away from acquisitions and some of the founders have also been wary of acquisitions.

Infosys shares fell sharply in a lacklustre market, and were trading down 0.92 per cent at Rs936.1, after hitting a low of Rs933.3 on the BSE.





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