Infy, founders rift: Company says no governance violations

Image: Vivek Prakash/ Reuters

Infosys, India’s second-biggest software services provider, declined to comment on reports of a Rs-12,000 crore share buyback terming them “rumours and speculation,” in a statement to the stock exchanges on Wednesday.

In a separate statement, the company also reiterated that it had done no wrong with respect setting CEO Vishal Sikka’s compensation, which was increased last year, or the severance payouts given to former CFO Rajeev Bansal and David Kennedy, the Bengaluru company’s former general counsel.

“To me the most important factor is the buyback. He’s (Vishal Sikka) has been firing many small and large shareholders for not agreeing for a buyback for a very long time,” Anil Singhvi, founder and non-executive director of corporate governance and proxy advisory firm IiAS (Institutional Investor Advisory Services), said in an interview with Forbes India.

“Infy is sitting on $5 billion of cash and they are neither declaring high dividend nor going for a buy back. And they don’t have any acquisitions plans. And they definitely aren't doing a $2 billion acquisition. They have been investing in startups but that I can say it is like day-to-day cash,” Singhvi added.

Infosys Founder NR Narayana Murthy brought in Sikka, a former SAP SE executive, in July 2014 to turn the company around after its growth had lagged the industry and larger peer Tata Consultancy Services in the preceding two years or so. Sikka took over as Infosys’s first non-promoter CEO on Aug. 1, 2014 and made close to $7.5 million in compensation for the year ended March 31, 2016.

In February last year, Infosys revised Sikka’s pay upward, giving him a chance to earn as much as $11 million in the current fiscal year, including performance-based variable pay and stock options.

Television channel CNBC-TV18 reported on Tuesday that Infosys founders NR Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani had questioned this increase in a letter to the board of directors of the company in January. The founders had also raised concerns about severance payouts handed to former CFO Bansal and former general counsel Kennedy, according to the broadcast report.

“The Board receives suggestions and inputs from various stakeholders, including Promoters, which are evaluated with due importance. The Company will continue to be guided by the overall interests of all stakeholders. With regard to concerns on governance being discussed in the media, we would like to reiterate that all decisions have been made bona fide, in the overall interest of the Company, and that full disclosures have already been made thereon,” Infosys said in an emailed statement.

The Times of India newspaper reported on the issue on Wednesday, comparing it with the rift between Tata Sons’ (then Chairman Emeritus) Ratan Tata and (then Chairman) Cyrus Mistry, who was ousted in November.
 
“No I don’t think it will be a Tata versus Mistry kind of a thing (battle), but definitely I think the founders are having a problem with Vishal. And Vishal seems to be at least giving this kind of impression that the board is completely with him. Which may not be entirely true,” IiAS’s Singhvi said.

Shriram Subramanian, MD of InGovern, a proxy advisory and research firm that assists institutional investors on corporate governance issues had this to say: “It’s an orientation issue between the founders and the now professional board and CEO on issues pertaining to values and practises. Though they (the founders) are out of the board they continue to have an emotional connect with the company, which in a way is bad. At the end of the day they had stepped down to let the professionals run the company.”