Board admits to subjectivity in ex-CFO severance pay

Mumbai: Infosys on Monday admitted that an element of subjectivity had influenced the quantum of

severance pay

granted to its former CFO

Rajiv Bansal

and that it had since then put in place a policy to ensure that there would not be a repeat of it.

Chairman

R Seshasayee

said that of the Rs 17 crore that was contracted to be given to Bansal, only Rs 5 crore had been disbursed. Asked whether Bansal was asking for the balance, he said the matter was going through the legal process and he could not promise what the outcome would be. He hoped that there would be no more Rajiv Bansal-like cases in the company. Seshasayee and CEO Vishal Sikka said that calling the severance package as hush money was very disturbing. They said Bansal exited because of a lack of chemistry, in Sikka’s words, and a lack of alignment, according to Seshasayee.

At a press conference where every board member was present either physically or through video links, Seshasayee launched a spirited defence of the board’s actions over the past two years. He emphasised that the board would not dilute the software giant’s ‘gold’ standard for corporate governance.

“At the time, there was a business judgment, an application of mind. In retrospect, I have no hesitation in saying that perhaps that judgment would have been different if the processes had been there... The process gap was that we had subjectivity in deciding the severance amount...So the learning was that the subjectivity element should be taken away and we have a more certain package as part of the employment contract,” Seshasayee said at a one-and-a-half-hour media briefing. Bansal’s severance pay was at the centre of recent differences between the company’s founders, led by N R Narayana Murthy, and the 10-member board of directors. “We have revised severance terms for key management personnel taking into account benchmark standards in various geographies across top level executives. This removes the subjectivity factor while taking such decisions,” Seshasayee added.

“There won’t be another Rajiv Bansal case for the media to report on,” he added in a lighter vein. Former Infosys legal head David Kennedy’s severance terms also came under criticism, prompting the board to take proactive steps in this regard. “We live in a glass house, which is good for transparency. But don’t stare at us for too long. It distracts and defocuses. We need to get on with our job,” Seshasayee said in a remark alluding to the media drama, but which is being interpreted as a message to the founders as well.

The Infosys chairman strongly defended Sikka’s so-called profligacy, which has figured prominently in the governance concerns raised of late. “Focusing on cost and not on value is a disservice. There is no expense incurred without value,” Seshasayee said, while detailing how Sikka’s chartered flights and high street office in Palo Alto were part of the company, which is transforming and rebranding itself. The CEO expenses will now be approved by the audit committee, he added.

Seshasayee said that the company’s corporate governance framework would be modified so that there is a common ground of values representing the vast, distributed shareholding.

“In large promoter-driven companies, the board will have a unified point of view reflecting that of the chairman,” Seshasayee said. “Infosys is one of the unique companies which have a professional management and professional board, a model that will emerge in India in the future.”

The board has appointed Cyril Amarchand Mangaldas to come up with guidelines so that information could be shared to founders within the confines of law.Seshasayee said there were cultural differences with founders but said going forward the board will look at managing these differences. “We have to work with the entire body of shareholders. It just can’t be a two-way affair, it has to be multiple-way communication.”

Seshasayee also supported Sikka’s $11-million pay packet which has raised eyeballs as founders are known for frugal lifestyles. He said the fixed part of the compensation came down to $4 million, from $5 million, an additional $2 million was linked to Sikka’s ‘longevity’ with the company, and the rest to steep performance targets.

The chairman justified by saying that a global consultant had benchmarked Sikka’s compensation with that of his peers in the US. “There are some shareholders who would believe that the compensation is excessive. This is a valid view, but the board has to go with the majority view.”

Earlier in the day, at a Kotak investor conference in Mumbai, Sikka said, “All this drama that has been going on in the media, it’s very distracting — it takes away attention — but underneath that there is a very strong fabric that this company is based on and it is a real privilege for me to be its leader.”


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