Infosys makeover: How Vishal Sikka is quietly phasing out an NRN legacy
With better salary hikes at Infosys, Sikka may be moving away from a Murthy legacy but is surely steering a major change
With Vishal Sikka speeding up the Infosys makeover, another legacy may be dying a slow death at the software major - the philosophy of compassionate capitalism, indicates a report in The Times of India today.
According to the article, the big salary hike CEO Sikka got this year is transforming the salary structure of the senior leaders at the company. Also it may widen the difference between the CEO salary and median remuneration of the employees. This goes against the concept of compassionate capitalism, which was a principle Infosys stood for.
For the uninitiated, NR Narayana Murthy was proponent of the concept of compassionate capitalism, which he said defined as "capitalism with fairness, justice and liberalism". He said it is "the most-suited philosophy to encourage entrepreneurship" - the only way to uplift the millions living in utter poverty by creating more job opportunities. As part of this, Murthy advocated controlling the CEO pay, to the extend that the ratio between the top salary and the lowest should be 20 to 25.
However, Sikka seems to have moved away from this philosophy in his bid to retain the talents at the top level.
Media reports had earlier said that Sikka's compensation from January 2017 has been increased to $11 million a year, up 55 percent on year, including the stock options.
"Just as the company's 2015 Stock Incentive Compensation Plan will increase the use of equity compensation to motivate and retain other senior executives, Dr. Sikka's new contract of employment will rely more on equity compensation and less on cash compensation to motivate and retain him. The Committee retained an independent consultant to assist with benchmarking Dr. Sikka's target levels of compensation to those of other non-founder CEOs at global technology companies of roughly comparable size and scale," Infosys had said in an exchange filing in February. The company also had extended the CEO's tenure by two years to 2021.
However, a report in the Mint newspaper in April said the the founders of the company may not be very happy with the extension given to Sikka and also the salary hike. The report said only 23.57 percent of the promoter votes were cast in favour of the resolution in the postal ballot conducted on 31 March.
The Times of India report on Monday said the promoters had a reservation about the salary hike accorded to Sikka as it went against the company's philosophy.
To be sure, the ratio between the CEO salary and the median remuneration of the employees at Infosys was comparatively lower at 116 in 2014-15. For TCS the ratio stood at 416.5, Wipro 169.7 and TechMahindra at 2920 ( according to a ToI report).
With the latest package, in all likelihood this ratio will witness an increase. But it has had a cascading effect on the salaries of the staff at the lower-rung too.
After the fourth quarter results, Infosys had said that it has given 6-12 percent pay hike along with stock options to high performers among the offshore employees. This is much higher than the 5-7 percent the company had given last year.
The company had said that 20-25 percent of the managerial staff will get stock options. It is after 5 years that the company is giving away stock options to employees, a report in the Mint quoted COO UB Pravin Rao as saying. He also said it is in keeping with the global standard.
"The next-generation technology firms are focused on increasing their market cap, and giving stock to all employees as compensation is intended to provide motivation to improve the company value. No better place to start that type of culture than at the top," Dan Marcec, director, content & marketing communications in US-based Equilar, has been quoted as saying in the ToI report on Monday.
What this means is the emergence of startups is impacting the policies of the Indian IT companies that were caught in a time warp as far as employee policies are concerned.
An earlier report in Reuters had noted that IT behemoths such as Infosys and Wipro are revamping culture to attract young talent and battle start-ups.
"To be sure, it is hard for large IT companies, with an army of thousands of employees, to change overnight. Yet, steps as small as implementing a casual dress code and allowing employees to use their own tech devices mark a major cultural shift in an industry that still relies heavily on manpower to win business," the report had said.
Clearly, with better salary hikes at Infosys, Sikka may be moving away from a Murthy legacy but is surely steering a major change. But whether this is indeed enough to boost the morale at the lower level remains to be seen.
Both the founders and the board of Infosys should realise that the current collision course isn’t doing any good to the company
A day after Infosys decided to sell its subsidiaries Skava and Panaya, a whistleblower sent a letter to SEBI demanding a probe into these transactions