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'Unfair To Majority Of Infosys Employees': Narayana Murthy Slams COO Pravin Rao's Pay Hike

Infosys chief operating officer Pravin Rao, who was recruited by co-founder Narayana Murthy in 1985, will also be eligible for Rs 4 crore in performance-based stock compensation.
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Infosys co-founder Narayana Murthy has criticised the company board over COO Pravin Rao's compensation.
Infosys co-founder Narayana Murthy has criticised the company board over COO Pravin Rao's compensation.

Highlights

  1. Narayana Murthy has criticised the pay hike of Infosys COO Pravin Rao
  2. Mr Rao's fixed salary per annum has been raised to Rs. 4.62 crore
  3. Infosys founders and family members owned 12.75% stake in the company

Infosys co-founder Narayana Murthy has criticised the decision of the IT company's board to approve a big salary hike for chief operating officer Pravin Rao. Mr Rao's fixed salary per annum has been raised to Rs. 4.62 crore (with effect from November 1, 2016) while the variable component of his package stands at Rs. 3.87 crore, payable on achievement of targets set by the board. He will also be eligible for Rs 4 crore in performance-based stock compensation.

According to Infosys' Annual Report 2015-16, Mr Rao's remuneration stood at Rs. 9.28 crore, including Rs. 3.6 crore in fixed salary and Rs. 5.68 crore in variable pay and long-term bonus. Infosys shareholders approved the board's February decision on pay hike for Mr Rao through a postal ballot held on March 31, the IT company said in a statement today. Nearly, two-thirds of shareholders supported the move, though many promoters abstained from voting on the proposal. 

"I have always felt that every senior management person of an Indian corporation has to show self restraint in his or her compensation and perquisites. He or she has to fight for maintaining a reasonable ratio between the lowest salary and the highest salary in a corporation in a poor country like India. The board has to create a climate of opinion for such a fairness by their actions," Mr Murthy said in a letter.

"Further, 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. This is grossly unfair to the majority of the Infosys employees including project managers, delivery managers, analysts, programmers, sales people in the field, entry level engineers, clerks and office boys who are toiling hard to make the company better," he added.

Mr Murthy had earlier questioned the board's decision on a pay rise given to CEO Vishal Sikka and the severance packages of two former senior officials. Infosys founders along with their family members owned 12.75 percent of the company as of end-December, according to stock exchange data. Infosys shares slipped over 1 per cent on Monday.



Full text of Mr Murthy's letter to the media:

"I have lots of affection for Pravin. Let me state you the facts.

I recruited Pravin in 1985 and had nurtured him throughout my stay at Infosys since then.

He had been sidelined. He was not even a member of the Executive Council at Infosys in 2013 when I came back. Kris, Shibu snd I encouraged him, elevated him to the board, and made him the COO when we recruited Vishal as the CEO. So, this abstention has nothing to do with Pravin.

Those of us who have always stood for fairness in compensation and practised 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.

I believe in striving towards reducing differences in compensation and equity in a corporation. You may not know that my Infosys salary at the time of the founding of Infosys was just 10% of my salary in my previous job. I ensured that my younger, co-founder colleagues got 20% higher salary over their salaries in their previous job even though I was 7 levels above them in my previous job and was 11 years older than them. I gave them huge equity compensation the like of which has never been replicated in this world. So, this abstention comes from somebody who has walked the talk.

I have always felt that every senior management person of an Indian corporation has to show self restraint in his or her compensation and perquisites. He or she has to fight for maintaining a reasonable ratio between the lowest salary and the highest salary in a corporation in a poor country like India. The board has to create a climate of opinion for such a fairness by their actions.

This is necessary if we have to make compassionate capitalism acceptable to a majority of Indians who are poor. Without compassionate capitalism, this country cannot create jobs and solve the problem of poverty. Experts tell me that capitalism may come to an end in the not-so-distant future if the current corporate leaders do not heed this advice in India.

Further, 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. This is grossly unfair to the majority of the Infosys employees including project managers, delivery managers, analysts, programmers, sales people in the field, entry level engineers, clerks and office boys who are toiling hard to make the company better. 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? I have got so many mails from these people asking whether this resolution is fair. No previous resolution in the history of the company has received such a low approval.

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 favor a top management person.

Thanks.

Narayana Murthy                       

                                                                                                                   



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