Is Rift Between Sikka And Infosys Founders Leading To Another Corporate Fight In The Making After Tatas Trouble?

Even as the dust appears to be settling on the Tata-Mistry war, there are reports that relations between the first non-promoter CEO of Infosys, Vishal Sikka, and a section of the IT major's founders are "less than ideal". In a faint echo of what happened at Bombay House, some of the promoter-shareholders are said to have expressed disquiet over what they see as shifting values.

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The issues they have raised over the past year or so include the sharp increase in Sikka's compensation early last year; the appointment of Punita Sinha, wife of Union minister Jayant Sinha, as an independent director; and a large severance pay of Rs 17.4 crore to ex-CFO Rajiv Bansal.

These differences, simmering for a while now, are thought to have widened, prompting the majority of the board, led by chairman R Seshasayee, to back Sikka, according to people close to the situation. The founders, together, own 12.75% in Infosys, with N R Narayana Murthy and his family owning the largest block.

A spokesman for Infosys said all decisions taken by the company were bona fide and backed by appropriate disclosures. The company takes suggestions and inputs from all stakeholders, including founders, the spokesman added.

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The company has been pointing out that Sikka's cash compensation actually went down and the increase has been primarily in RSUs (restricted stock units) and stock options, and that these are directly linked to incredibly steep goals. The goals have not been made public, but Sikka is said to have laid out a stiff target of $20 billion in revenue, 30% in operating margin, and $80,000 in revenue per employee by 2021. Infosys currently has revenue of about $10 billion.

On Punita Sinha, the board's position has been that she is eminently qualified for the job. On severance packages, the thinking is that the company needs to move to international standards. Apart from Bansal, two others - Michael Reh, an executive VP, and David Kennedy, legal counsel-were also paid substantial severance packages when they quit.

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Infosys has said that 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.

However, a senior Infosys founder is said to have written Sikka a personal mail last month seeking to dispel any impression that the founders were plotting to change the CEO. However, this could not be independently verified by TOI. Sikka's strategy since he took over in August 2014 has been to focus on improving employee morale, innovation and moving up the value chain.

He has maintained that Indian IT's older businesses of application development & maintenance, infrastructure management and BPO are slowing and the margins are falling. He believes companies need to innovate and offer value-added services.

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This move also demands significant acquisitions.But sources said that some of the founders have also been wary of acquisitions. Infosys, through its promoter-led era, has mostly stayed away from acquisitions and followed a remuneration strategy based on ¡°compassionate capitalism¡°.

But as many HR consultants have pointed out, the Infosys founders' policy of low compensation worked as they had huge equity stock in the company which paid handsome dividends, an advantage that senior executives who joined much after the company's storied IPO, didn't have. Senior management hence needed to be paid at market rates.