The board of Infosys Ltd., Indiaâ€™s second-largest technology services company, is facing questions over executive compensation and corporate governance in a letter sent by at least three of its founders, according to people with knowledge of the matter.
Narayana Murthy, Nandan Nilekani and Kris Gopalakrishnan have signed the document asking why Chief Executive Officer Vishal Sikkaâ€™s compensation was increased, said one of the people, who asked not to be identified discussing the contents of a private memo. Sikka was paid 487 million rupees ($7.3 million) in base salary, bonus and benefits last year, compared with a base salary of 45.6 million rupees for a partial period in 2015.
The letter also questioned severance packages offered to two top-level executives who departed the company.
Infosysâ€™s revenue is projected to climb 10 percent in the current fiscal year, compared with 17 percent prior, as clients cut back on spending.
Cloud-computing and automation of information-technology tasks are disrupting Infosysâ€™s business model of charging man hours for application development, infrastructure maintenance and other work that keeps corporate computer systems and networks up and running.
â€œInfosys is behaving in a much more non-transparent manner than in the past,â€ said Shriram Subramanian, managing director of corporate governance researcher InGovern. â€œAt the same time, Infosysâ€™ co-founders seem unable to cut off their umbilical cord with the company.â€
â€œThe board receives suggestions and inputs from various stakeholders, including promoters (founders), which are evaluated with due importance,â€ Infosys said in a statement. â€œThe company will continue to be guided by the overall interests of all stakeholders.â€ it said in a statement on Thursday.
Kiran Mazumdar-Shaw, an Infosys board member and chairman of biotechnology company Biocon Ltd., said there was no rift within the board.
â€œWe are nicely focused on what the company needs to do, we have moved ahead on issues like severance pay and the CEOâ€™s salary after taking them through due process,â€ she said.
Co-founder Murthy, a previous Infosys chairman, said: â€œIâ€™m sitting and working quietly in my office.â€ Nilekani, his successor, said â€œI have not commented on Infosys for seven years and I am not going to start now.â€
The two founders had previously voted against Sikkaâ€™s salary raises. Sikka was reappointed as CEO in April for a five-year term through 2021.
â€œCorporate governance is weak and the chairman does not understand the challenges of the business,â€ said Mohandas Pai, a former chief financial officer and director of Infosys. He said a substantial part of his net worth is in Infosys shares.
Another former CFO, Venkatraman Balakrishnan, said the â€œobscene severance packagesâ€ paid to the departing executives reeked of impropriety. â€œInfosys used to be the gold standard for corporate governance in India, we wrote the rules, and now that legacy is being diluted,â€ he said.
Balakrishnan and Pai also wrote to Infosysâ€™s board over a year ago, asking the company to return more cash to shareholders via buybacks. â€œThe board brushed off our letter,â€ Balakrishnan said. â€œWhat $32-billion market cap company can afford to have $6 billion of cash sitting on its balance sheet and nearly 30 percent of its income coming from â€˜other incomeâ€™? The time has come for the company to act,â€ he said.
Infosysâ€™s management may find itself fending off pressure from investors rather than focusing on its business, said InGovernâ€™s Subramanian. Some stakeholders may band together before the annual general meeting, due in the coming months, to remove some directors from the Infosys board, he said.
â€œIt could be a Tata Sons situation,â€ Subramanian said, referring to the rift within Tata Sons Ltd. that led to the ouster of Chairman Cyrus Mistry.