Top 3 reasons for the ‘Sikka’ Feud

The Indian IT industry has been seeing a huge transformation in the recent past. The change of guard from the traditional methodologies of running business to the new age automation tools, has risked the very foundation of the so called IT business model in India. Vishal Sikka the first non-founder CEO of the $10-bn IT behemoth Infosys, has played a huge part in this transition of the IT industry. The former SAP head, has brought fresh ideas to the the desi-Infosys, and plans to make Infosys a $20-bn company.

But, recently there has been a clash of culture leading to which public statements have poured out and there seems to be a clear rift between Sikka and the Infosys founders. The founders have sought to take the high ground, arguing that their issues with Sikka and the board are about governance, principle, values and transparency.  Let’s understand the real reasons of this rift:

  • The induction of Punita Sinha.. 

About a year ago Punita Sinha, wife of Union minister Jayant Sinha, was inducted as an independent director. Murthy abstained from voting on her appointment. While he emphasised that he had great respect for her as a professional, his objection was in the fact that during the entire history of Infosys, it had never invited the spouse of any active politician to the board. While the founders did not wanted any political agenda to be factored in the company, Sikka and the board’s argument to that was that she was eminently qualified -having been a fund manager with Blackstone, among others -and that the decision was taken solely on merit.

  • Vishal Sikka’s steep compensation..

The ratio between the highest compensation in the firm and the median salary should ideally be 50 to 60. The biggest concern for the founders has been the 55% increase in CEO compensation when average salary hikes have hovered in the single-digits of 6% to 8% for the rest of the employees at the company. Sikka’s compensation saw a sharp increase to $11million annually, in 2017 from $7.08 million in 2016. While Sikka says that he actually gets less cash now than when he was the CTO at SAP, the question is more about ideals. The ideals with which this company was formed and that is “compassionate capitalism”.

  • High severance packages to departing top executives..

A severance package is pay and benefits employees receive when they leave employment at a company. Ex-CFO Rajiv Bansal  received a severance package of Rs 17.38 crore, equalling 24 months of pay. No CFO in India receives such a high severance package. Former general counsel (David Kannedy) who was with the company for a “very short period” was paid a very high salary and a high severance package.  Infosys founders N R Narayana Murthy, Kris Gopalakrishnan and Nandan Nilekani had written to the board last month expressing their concerns over pay hike to Chief Executive Officer (CEO) Vishal Sikka and the severance package offered to the two former senior executives.

 

From April 2011 till January 2017, the shareholder value has not increased at all and the market capitalisation of the Bengaluru-based IT major has also remained at the same level during the period. No doubt that we can see global cultures in our desi companies. The induction of global leaders in high ranks is bound to bring in the West culture – “Lots and lots of money”. But such a culture cannot be withhold with large IT firms which believes in mass upheaval of society rather than a few individuals. Vishal Sikka and his team needs to learn from the likes of Narayan Murthy- A global leader who always believed in compassionate capitalism. 

Advertisements