As the media continues to speculate on the perceived differences between the Infosys Board and its founding members, the Infosys management hosted a press conference to address some of the key queries that have been doing the rounds in the electronic & print media as well as the social media. Overall, the press conference was adeptly handled by Chairman of the Board, R Seshasayee and the Infosys CEO, Vishal Sikka. While the responses may not have addressed all queries in entirety, it must be said to the credit of the Infosys management that they have upheld the traditional Infosys practice of transparency and reaching out to stakeholders. Here were some of the key issues raised in the press and the key takeaways from the Infosys press conference…
Differences between the founders and the Board…
While Seshasayee has acknowledged cultural differences between the Infosys founding promoters and the current management, he has attributed such differences more to the typical process by which ideas evolve over a period of time. Both Seshasayee and Sikka underscored at the press meet that Mr. Murthy and the other founding members continue to be the intellectual and philosophical sounding board for many of their current and prospective ideas.
Calls for resignation of the Chairman of the Board, Mr. R Seshasayee…
There have been calls from some sections, principally some former employees of Infosys, for Seshasayee to step down from the post of Chairman of the Board till the corporate governance issues are resolved. Seshasayee has reiterated that the Chairman of the Board was only answerable to the board of Infosys and therefore the Board alone had the authority to decide on the presence of Seshasayee on the Board. He also emphasized that there were no corporate governance issues and that the highest standards continue to be adhered to.
Clarification on Sikka’s compensation
One of the points of contention; as was also pointed by some of the key founding members was the fairly large compensation paid to Vishal Sikka. There were concerns on the ratio of the CEO salary to the average Infosys salary as well as the substantial hike in a tepid year. Seshasayee has clarified that the compensation had a very large variable component and had been approved by the board after due deliberation and after benchmarking with the peer group levels in various countries. It was also emphasized that Sikka’s compensation continues to be very reasonable compared to many promoter CEOs in India and professional CEOs abroad.
Clarification on severance package to Rajiv Bansal
The hefty 24-month severance package paid to former Infosys CFO, Rajiv Bansal, was one of the key issues over which Mr. Murthy had raised issues of corporate governance. Seshasayee has denied allegations of any hush money being paid. He also clarified that only a part of the severance package was actually paid and the balance was held up after objections were raised. The Board of Infosys also confirmed that globally there was a practice of paying a high severance package. However, the Board has also admitted that the severance package was arbitrary and that was unlikely to repeat as requisite processes and checks were in place on the subject.
Acquisition of Panaya of Israel
This was linked partly to the exit of Rajiv Bansal. It was alleged that Bansal had raised red flags over the Panaya acquisition but the company had gone ahead with the same. However, Seshasayee and Sikka have confirmed that the financial accounts of Panaya were approved and certified by Bansal before the acquisition went ahead. The allegations had assumed significance since Panaya had shown signs of financial stress even at the time the acquisition was being negotiated. However, Sikka has clarified that due process including due diligence and vetting by Deutsche Bank was carried out before the decision was taken.
Use of cash pile of Infosys
Here again the demands have been coming more from a few ex-employees of Infosys and not from the large stakeholders. There has been a demand for using the $4.5 billion cash pile to reward shareholders either through a special dividend or a buyback of shares. Both Seshasayee and Sikka have confirmed that the primary focus of the company continues to be growth and transformation and that will drive the decision to use up the cash pile in the books. Traditionally, Infosys has never been too aggressive on dividend payouts or buybacks as they were typical signs of a company not having enough investment and growth avenues.
Induction of Punita Sinha in the Board of Infosys
The controversy over the induction of Punita Sinha has also been laid to rest in the Press Conference. It was alleged in some quarters that Punita Sinha was inducted into the Board considering her political affiliations (Punita is married to Jayant Sinha, part of the NDA government). Seshasayee has categorically clarified that Punita was inducted purely for her own achievements in the field of investment and global banking over her 30-year career. Here political affiliations were more incidental and had little bearing on Infy’s decision to induct her into the Board.
To sum up the press conference, it must be admitted that both Seshasayee and Sikka have given a clear message that the standards of governance and transparency will continue to be upheld at Infosys. They have been candid in admitting certain lapses and that should give comfort to the founding promoters and other stakeholders too. To the credit of the Infosys Board they have not allowed the public emotion of the moment to overwhelm them. They have reiterated their commitment to all stakeholders and that is what any Board is supposed to do. The fact that institutional investors continue to repose faith in the current Infosys Board is, perhaps, evidence enough that the Board is on the right track!
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