N R Narayana Murthy is at it again. By writing a long missive complaining about the hefty pay hike to chief operating officer U B Pravin Rao, the chairman emeritus of software leader Infosys is performing the noble task of becoming an activist shareholder in the company he founded, nurtured and catapulted to global fame. But there are ifs and buts in his claims that will raise eyebrows and in some places, may even evoke chuckles.
Most of India's leading listed companies have been long governed by family-controlled boards in which independent directors have been at best lackadaisical and at worst complicit in violation of the principles of corporate governance -- as we witnessed in the long journey of the disgraced Satyam Computer Services that was ultimately gobbled up by Tech Mahindra. Infosys, in contrast, has been a paragon of corporate virtue, in which the founders have created a gold standard for rewarding shareholders that often surpassed Dhirubhai Ambani's Reliance Industries Ltd on many counts.
Whatever the detail of whether Rao deserves a pay hike or not, in Murthy's questioning of board decisions, we are seeing a healthy precedent of transparency in shareholder democracy that should increasingly become the norm as companies cut off family apron strings to usher in hard questions on what executives deserve.
The tragic flaw in Murthy's missive, however, is in the way he is invoking ideas of trusteeship capitalism championed by Mahatma Gandhi in slamming Rao. Whether Murthy likes it or not, Infosys is viewed by its shareholders, employees and the general public as an example of clean capitalism, not as a social enterprise that the elder statesman makes it out to be. This is not the first time that he is preaching socialist virtues at the altar of capitalist greed.
Murthy is justified to the extent that disparities in pay packets make the rank and file of Infoscions restive and lose morale if there is no fairplay based on corporate governance principles and benchmarks. However, to ask the COO to make a personal sacrifice (that is exactly the word he has used) is to deny the accepted morality of market capitalism that it is fine to pursue profits as long as the means are ethical, legal and transparent. The criteria invoked should be corporate benchmarks that ensures employee motivation, not necessarily greater social welfare. The real issue is whether Rao deserves the pay packet enough to not want him leave and join the ranks of former colleagues like Ashok Vemuri and whether Infosys needs him that much.
Is Murthy asking for too much? He seems to be trying to impose his personal values on a commercial company that he sees is a social institution. My heart goes out for Murthy. Alas, the mind does not.
Shareholder value is a complex concept in which talent management, customer relations and profitability, which are often in conflict with each other, have to be reconciled smartly by boards. It is justifiable that earnings at higher levels in a company are linked to performance, and at the CXO level, to share prices themselves. But it is not the job of Infosys board to create jobs for India's millions except in an incidental way - much as it is desirable.
Murthy has been raising other issues in the past such as the price of a key acquisition and the severance pay given to its former CFO Rajiv Bansal. Murthy's own difficult record as a comeback CEO in 2013 to rescue it out of a crisis and his bringing in his own son as an aide cast a shadow on his questions.
To be fair to Murthy, his questions are often in order, even if he is overruled by the board. But he can be subjected to some questions as well: Now that it is a listed company with an accountability to shareholders, why should Infosys necessarily behave like a social enterprise? And why should not Pravin Rao deserve the privilege of a higher pay when he has been denied the honour of being CEO despite having served Infosys for decades?
No easy answers there except to say that the pennies of shareholder value and corporate governance issues are valid in the current context but the pounds of sacrifice demanded by Murthy are a bit stretched.
(The author is a senior journalist. He tweets as @madversity)
Updated Date: Apr 03, 2017 10:34 AM