Compassionate capitalism: Why Murthy is right in opposing Infy CEO Vishal Sikka's pay hike
The obscene amount of money Sikka earns to run Infosys may perhaps be justified by the salary math the world’s top corporate honchos apply to their own packages but makes little sense when put in perspective
New Delhi: N R Narayana Murthy and his wife Sudha are known to be frugal, despite being a billionaire couple. A news report mentions today that amid the raging controversy over the company Murthy co-founded – Infosys - he treated Infosys’ Chairman R Seshsayee to simple breakfast of idli and dosa at his modest Bengaluru residence yesterday morning. No fancy multi-course meal for the Murthys and none obviously for their guests. So, when last week Murthy raised the issue of the Infosys CEO’s obscene salary, triggering the present crisis, one was forced to sit up and take notice. For the last few days, newspaper reports have spoken of Murthy’s displeasure with the proposal to further increase Infosys CEO Vishal Sikka’s remuneration.
Founders together own about 13 percent in Infosys and have been a collective weighty voice on important matters. Murthy has also voiced concerns over a large severance package devised for the ex-CFO. On the former, Chairman R Seshasayee said last evening everything was in order. But on the severance pay issue he admitted that due process may not have been followed and that the situation would be rectified. There are no major corporate governance issues at Infosys but the company and its management should look at perception issues which have cropped up after Murthy pointed out the obvious.
Sikka took home close to Rs 49 crore last fiscal. No one is saying that Sikka’s pay packet violates any law, neither has it been kept a secret. The remuneration Sikka received in FY16 was duly approved by Infosys’ board of directors and has been duly disclosed in the company’s annual report. The issue is really this: the obscene amount of money Sikka earns to run Infosys may perhaps be justified by the salary math the world’s top corporate honchos apply to their own packages but makes little sense when put in perspective.
This piece shows Sikka took home a salary which was 935 times the median pay at Infosys last fiscal. And that he was the second highest paid non-promoter CEO among India’s top 10 bluechip companies, after L&T’s A M Naik, to get multiple times more than the median pay at his company. While all this is within the law, above board – what Murthy is alluding to perhaps is some sort of sanity in pay packets of the top honchos of India Inc. His long-stated philosophy on “compassionate capitalism" suggests the ratio between highest compensation in the firm and the median salary should ideally be 50 to 60. Sikka is already taking home way beyond this.
The recent report by Oxfam ‘An economy for the 99 percent’ points out not only that the world’s wealth is concentrated in the hands of the very few, it also shows why corporate goals of maximising shareholder profits are leading to increasing inequity in the world. Instead, this money could be put to better use, is what Oxfam says, and in the context of Murthy’s objections, perhaps a part of the hike Sikka wants this year could also be redeployed for the more needy?
Oxfm says “In many parts of the world, corporations are increasingly driven by a single goal: to maximise returns to their shareholders. This means not only maximising short-term profits, but paying out an ever-greater share of these profits to the people who own them. In the UK, 10 percent of profits were returned to shareholders in 1970; this figure is now 70 percent. In India, the figure is lower but is growing rapidly, and for many corporations it is now higher than 50 percent.... The increased return to shareholders works for the rich, because the majority of shareholders are among the richest in society, increasing inequality……Every dollar of profit given to the shareholders of corporations is a dollar that could have been spent paying producers or workers more, paying more tax, or investing in infrastructure or innovation.”
Even if one shrugs off the hint of philanthropy and socialist mindset in all of this, perceptions have always mattered. A flamboyant Vijay Mallya was once the cynosure of all eyes for his flashy lifestyle and the airline he built, which is still remembered for the various luxuries offered to guests. But since Mallya continued to flaunt his wealth long after the business had sputtered and died, no one really now cares if he actually committed any fraud in the Kingfisher Airlines saga – he is remembered for complete lack of empathy with hundreds of employees who suffered as the airline shut down. That perceptions matter more in a country like India becomes more apparent when one scans the list of corporate defaulters to public sector banks – many corporate defaulters are way ahead in this list over Mallya but his name evokes disgust while the others continue to lead peaceful lives in near anonymity.
Gordon Gekko’s motto of “Greed is good” in the Oscar winner eighties movie ‘Wall Street’ may have been the greatest advertisement for capitalism in the eighties, but post 2008, when the same ‘masters of the universe’ sought and got US government dole to resurrect their sinking businesses, a little more humility would have been in order. Similarly, Sikka may deservedly be getting a very high compensation but he should abandon hopes of either winning the perception game or the sympathy of the public.
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