Infosys founder Narayana Murthy criticizes pay hike for operations chief Pravin Rao

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MUMBAI/BENGALURU: A dispute between the founders and the board of software services company Infosys Ltd over governance spilled into public again on Monday, as founder N.R. Narayana Murthy criticized a pay hike for Chief Operating Officer Pravin Rao.

Infosys defended the move, but said it took a statement from its founders “as important feedback”.

In a letter released to media, Murthy said a roughly 60-70 percent pay rise for a top executive, even including a variable performance-related element, was not appropriate when most employees had increases of just 6-8 percent.

“This is grossly unfair to the majority of the Infosys employees,” he said. “The impact of such a decision will likely erode the trust and faith of the employees in the management and the board.”

In a later statement, Infosys said Rao’s pay increase reflected “the philosophy of aligning the interests of our leadership team to long-term shareholder interests”.

It said the cash component of Rao’s salary had actually declined 10.6 percent to 46 million rupees ($708,183), although the performance-based component had gone up.

Given the four year vesting period of the stock, the net increase in Rao’s compensation for the year to March 2018 will be 1.4 percent, Infosys said. It could go up to 33.4 percent in the fourth year if similar grants are made in subsequent years based on company and individual performance, it added.

A stock exchange filing over the weekend showed only 24 percent of Infosys’ promoter shares were voted in favor of a resolution seeking a revision in Rao’s compensation, while others abstained from voting.

Infosys said in Monday’s statement its board “acknowledges the sentiments of shareholders who have not voted in favor of the resolution”.

The company had sought to reassure investors and analysts in February that it was not being distracted by the dispute with its founders over how the company was being managed.

The founders own 12.75 percent of Infosys. Led by Murthy, they had earlier questioned the pay rise of chief executive Vishal Sikka and the size of severance payouts given to others, including former finance head Rajiv Bansal.