It’s easy to look at Narayana Murthy’s open letter on executive compensation as the first salvo of the second round between the Infosys veteran and current management led by Vishal Sikka. After all, Murthy addressed the letter to select Alpha journalists who never miss an opportunity and made his instructions clear.
If you use the contents of this mail, please quote me verbatim and in full. Please do not paraphrase.
It’s easier still to be deliberately mischievous and see Murthy’s sharp words singling out Chief Operating Officer (COO) Pravin Rao as an expression of discomfort of the changing internal dynamics at Infosys. Rao was Murthy’s protégé, and probably still is; a fact Murthy explicitly brings out.
I recruited Pravin in 1985 and had nurtured him throughout my stay at Infosys since then. He had been sidelined. He was not even a member of the Executive Council at Infosys in 2013 when I came back. Kris, Shibu snd [sic] I encouraged him, elevated him to the board, and made him the COO when we recruited Vishal as the CEO.
It’s easiest, however, to ignore Murthy’s explanations about how this isn’t really about Pravin or Vishal Sikka, especially if mischievousness trumps reason, and miss the sharpest and most pertinent point that the corporate veteran is making. He writes:
So, this abstention has nothing to do with Pravin. Those of us who have always stood for fairness in compensation and practised it, right from the day Infosys was founded, will have to demonstrate it when needed. This is a time when it is needed. Nothing more and nothing less.
Murthy’s words are not to be taken lightly, nor his assertions that this fight is not about individuals like Sikka or Rao. At the risk of paraphrasing Murthy’s core thoughts, the veteran’s letter is more about the specific nature and character of capitalism that India needs to nurture for future generations, rather than about boardroom wars.
Murthy’s questions, however uncomfortable, need to be nurtured and protected, and treated as the foundation for creating a blueprint for a positive and benevolent capitalism. In the Indian corporate landscape, Murthy is a rare titan whose rootedness to values of equity and fairness is monkish.
Values that new age corporate India possibly considers as anachronistic and outdated, often seeing them as bells and whistles to be brought out during an annual general body meeting or a Corporate Social Responsibility (CSR) event.
Murthy is proud, and justifiably so, in the letter about being someone “who has walked the talk”. His salary at the time of founding Infosys, to quote his words, was “just 10% of my salary in my previous job.” His gentle rebellion [my word, not his] at how the unfairness of high salaries to a few burdens the many honest and hardworking people, “project managers, delivery managers, analysts, programmers, sales people in the field, entry level engineers, clerks and office boys who are toiling hard to make the company better”, smells of a socialist spirit of a bygone era. In fact, Murthy was deeply influenced by socialism during his younger days.
It’s commendable that even at the risk of getting isolated, which it seems he is, Murthy is single-minded about the need to distribute wealth appropriately, create value for everyone involved in an enterprise and keep the creative energies of markets bubbling at all levels. He almost seems to be advocating an civilising agenda for capitalism to tame its raw market spirits. Murthy also puts the onus of responsibility for taming the market squarely on the senior management “for maintaining a reasonable ratio between the lowest salary and highest salary in a corporation for a poor country like India”.
Implicit in the letter is also a grudging admission that left to itself raw market spirits will eventually be corrosive for the larger social good of country. And, yes Murthy still considers India a poor country, and quite rightly so considering that close to 60 percent of the country still lives on less than Rs 140 a day. Murthy’s parting shot in the letter is as telling about the current nature of capitalism in India, as it is about what the nature of capitalism in the country needs to be.
This [reasonable compensation] is necessary if we have to make compassionate capitalism acceptable to a majority of Indians who are poor. Without compassionate capitalism, this country cannot create jobs and solve the problem of poverty. Experts tell me that capitalism may come to an end in the not-so-distant future if the current corporate leaders do not heed this advice in India.
Indians are far more exposed to macho capitalism where Alpha behaviour traits of grab and grab more and conquests are celebrated and feted in different forums. The rewards for putting such traits to good use usually takes the form of extraordinary perks and super-high salaries for senior executives. We are also slowly getting used to a culture of superstar CEOs and management teams, borrowing liberally from the American school of capitalism, in the process abandoning some of our own homegrown system of checks and balances that older corporate houses followed.
In such a scenario, it might seem that Murthy is being too idealistic and possibly quite out of sync with the rest of the world. But this cannot be more further than the truth, as I have written earlier.
Murthy’s advocacy of compassionate capitalism has strong roots in the Nordic and Scandinavian models of corporate capitalism that not only engages intensively with a social welfare state, but also puts self-restraining caps on executive salaries. Data mined by Hay Group, a management consultancy firms, for example, shows that the total pay for top executives in Sweden and Denmark is about 75 percent of the European average, and interestingly lower in Norway and Finland.
Murthy is pointing to a model of capitalism that’s fundamentally different from the one that’s increasingly practiced in India. It’s a model that puts restraint, fairness, equity and larger social good at the heart of its operations. It’s also a model that Prime Minister Narendra Modi has alluded to countless times. Instead of looking at Murthy’s letter only from the prism of Infosys and its changing dynamics, it would do all of us a world of good if we start looking at it as the first step to debating the contours of a new model of equitable capitalism for an emerging India.
Swaminathan is Consulting Editor Firstpost. He is also Contributing Editor Governance Now
Updated Date: Apr 03, 2017 15:47 PM