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5 tipping points that eventually led to CEO Vishal Sikka’s shock exit from Infosys

Vishal Sikka was the first non-promoter CEO at the helm at the $10 billion company

Written by: India TV Business Desk, Bengaluru [ Published on: August 18, 2017 13:33 IST ]
Murthy has often been critical of the Infosys management,
Murthy has often been critical of the Infosys management, including Vishal SikkaPhoto:PTI

After months of tussle that played out very publicly between Infosys founders and its top management, Vishal Sikka today resigned as the CEO and Managing Director of Infosys. Sikka put in his papers and made no effort to hide his disenchantment with the founders, something he cited as one of the reasons behind his departure from the company.

Everyone from the company’s Board to its management has come down hard on founder NR Narayana Murthy over what they termed as his ‘misguided campaign’ against Sikka. The company was equally scathing in its statement, castigating ‘critics’ for ‘unfound personal attacks’ on the management and categorically stated that it found no merit in the accusations that were hurled at the Infosys CEO.

"Mr. Murthy's continuous assault, including this latest letter, is the primary reason that the CEO, Dr. Vishal Sikka, has resigned despite strong Board support," the company's board said in a press release.

The spat between Murthy and Sikka became public earlier this year when the founder began questioning the company over issues of deteriorating corporate governance. Sikka and the company responded to the charges but failed at containing the situation. Coincidentally, Murthy’s fiercest attack on Sikka came on the day he resigned. Murthy said three Infosys directors had told him that “Sikka was CTO, not CEO material.”

Murthy may have been one of Sikka’s sharpest critics, but his shock departure following his appointment in 2014 has been driven by other factors too.  Many of the top executives he hired from his previous company SAP quit in the last year and a half. Growth slowed down after peaking new highs in the first two years of Sikka’s tenure and the company’s shares have taken a hit in this period too.

Here are the 5 tipping points that perhaps led to the exit of Vishal Sikka, the first non-promoter CEO of the $10 billion company:

Rajiv Bansal severance package

The issue became a big talking point after founders targeted the company and its management, including Sikka, for the severance package offered to former CFO Rajiv Bansal. Infosys and Bansal had agreed on a severance payment of Rs 17.38 crore equivalent to 24-month pay during the latter’s departure from the firm. The company at the time said that the payment includes non-compete obligation, including other rights and obligations. The issue was flagged by the founders and the company had to issue a clarification over what was termed as an exorbitant amount.

Vishal Sikka’s salary

One of the highest paid executives, Sikka was eligible for a USD 11 million (about Rs 70 crore) pay including basic salary, variable pay, restricted stock units (RSUs) and performance stock options for 2016. While the company clarified that the salary component had gone down by as much as 40 per cent, and that the rise has been primarily in restricted stock units and stock options, which are directly linked to incredibly steep goals. The company, however, did not elaborate on what these goals were. Sikkas salary was revised from USD 7.08 million to a handsome USD 11 million package with effect from April 2016, a move that did not go down well with the founders, including NR Narayana Murthy.

Anonymous complaints

A whistleblower’s letter to market regulator SEBI in February this year over Infosys’ acquisition of Israeli automation technology company for USD 200 million or Rs 1,250 crore in cash stirred quite a controversy. The letter alleged that Infosys executives had personal interests in buying the Israel-based Panaya firm in February 2015 and that they benefitted from the deal personally. In an email to employees, Sikka said  that the charges " create a false alternate-reality out of events and dates, with embellishments that are calculated to mislead and sensationalise". The charge came right in the middle of an ongoing feud between Infosys founders and Sikka.

COO pay hike

In April 2017, NR Narayana Murthy shot off an email to the company terming the board-approved compensation hike for Chief Operating Officer U.B. Pravin Rao as "not proper". Murthy said it will "erode the trust and faith of the employees in the management and the board". Murthy said giving nearly 60 per cent to 70 per cent increase in compensation for a top level person (even including performance-based variable pay) when the compensation for most of the employees in the company was increased by just 6-8 per cent is "in my opinion, not proper". Murthy said he always believed in striving towards reducing differences in compensation and equity in a corporation.

Resistance to acquisitions

Sikka has often held that the current business of the IT sector is slowing down and has pushed for the need to innovate and offer value-added services. However, media reports have it that a section of the founders are against this acquisition-based approach to growth and business. This has been something that has reportedly frustrated the management quite a bit in the face of a slowdown in business and falling margins.

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