Infosys Crisis In 10 Points, Top Management's Crucial Address Today
The board of directors of IT major Infosys will be
addressing a press conference today at 6 pm in Mumbai - an event, according to
analysts, the markets are closely looking at. CEO Vishal Sikka is
also expected to be present at the event. The markets are hoping for a positive
solution to the present crisis at Infosys, says Sanjiv Bhasin, executive VP
(market & corporate affairs) at domestic brokerage IIFL.
1) Infosys CEO Mr Sikka will also address an
investors meet today and may brief fund managers on issues that have prompted
co-founder N R Narayana Murthy to air his discontent against
the board.
2) Foreign portfolio investors and institutional investors like
insurers and mutual funds hold a majority stake in Infosys, as of end-December. Infosys
founders along with their family members owned 12.75 per cent of the
company.
3) Mr Murthy, along with other co-founders Nandan Nilekani and S
Gopalakrishnan, had last month reportedly written to Infosys board,
questioning sharp hike in Mr Sikka's compensation and hefty severance packages
offered to two former top-level executives.
4) Of the large financial deals given to exiting senior employees,
Mr Murthy in an interview to the Economic Times said that they
"raise doubts whether the company is using such payments as hush money to
hide something". He also spoke of "a concerning drop in governance
standards at Infosys".
5) Infosys said on Thursday that "the board is fully
aligned with the strategic direction of Dr. Vishal Sikka and is very
appreciative of the initiatives taken by him in pursuance of this
transformation". The statement was issued by Infosys board chairman R
Seshasayee.
6) The founders' objections included concerns about executive pay,
including a raise for Mr Sikka, who became CEO in 2014. Last year, his annual compensation (including
variable components) was raised by over 50 per cent to $11 million (Rs. 74
crore) from $7 million (Rs. 47 crore).
7) The IT company said its founders and board could have differing
views on issues such as Mr Sikka's compensation, the appointment of certain
independent directors and the severance paid to former employees but all
decisions were taken with the approval of shareholders and the necessary
disclosures.
The board said it is open to suggestions from various stakeholders, including
founders, but "is committed to fulfilling its fiduciary responsibility to
act independently and in the overall interest of the
shareholders". Infosys said it has recently-appointed corporate
governance experts to receive and assess input from various stakeholders and
make recommendations to the board.
8) Kiran Mazumdar-Shaw, an independent director, said it's
incorrect to equate the current developments at Infosys with the allegations of
lapses in corporate governance at the Tata Group, whose former chairman Cyrus
Mistry was abruptly sacked by the $100-billion salt-to-software conglomerate in
October last year. "As far as the board is concerned, we certainly want to
make sure Mr Sikka and his management team really focus on growing and
transforming Infosys," she told NDTV, stressing "it's in everyone's
best interest to move forward".
9) Former chief financial officer V Balakrishnan last
week said an interim chairman should be appointed at the earliest to
"effectively" engage with its co-founders. Demanding that chairman
Ramaswami Seshasayee steps down, Mr Balakrishnan said the chairman should take
responsibility for the "lapses" in corporate governance at the
Bengaluru-based company.
10) Former chief financial officer Rajiv Bansal's severance
package amounted to Rs. 17.38 crore ($2.58 million), or 24
months' pay, Infosys said in a statement last year. In a January filing with
the US market regulator (SEC), Infosys, which is also listed on Nasdaq, said
former general counsel David Kennedy would receive severance payments of Rs. 5.8
crore or $868,250 and other reimbursements over 12 months.
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