What happens when a multi-billion-dollar firm’s founders lock horns with its board

Narayana Murthy’s latest missive on the salary hike for COO Pravin Rao has just deepened the rift between Infosys founders and the company board. Photo credit: Pixabay.

All’s not well at India’s IT bellwether Infosys (INFY.NS). Its founders, led by N R Narayana Murthy, have been at loggerheads with the company board on what the founders called “the current poor governance standards at Infosys.”

Yesterday, Narayana Murthy slammed the salary hike proposed for the company’s chief operating officer (COO) Pravin Rao in an open letter to the media.

… Giving nearly 60 percent to 70 percent 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% to 8% is, in my opinion, not proper.

He added: “This is grossly unfair to the majority of the Infosys employees including project managers, delivery managers, analysts, programmers, sales people in the field, entry level engineers, clerks and office boys who are toiling hard to make the company better. The impact of such a decision will likely erode the trust and faith of the employees in the management and the board. With what conscience can a decent person like Pravin ( a man schooled in Infosys values for over 30 years) tell his juniors that they should work hard and make sacrifice to reduce cost and protect margin?”

With a market capitalization of INR 2.32 trillion (US$35.8 billion), Infosys is one of the few companies in India which got itself a professional CEO in June 2014 when it poached Vishal Sikka from German software company SAP AG (SAPG.DE).

Vishal Sikka, CEO of Infosys. Photo credit: Gregor Wolf.

See: Infosys’ billionaire founder: this winter will ‘separate men from boys’

The rift

Vishal was to usher in a strategy overhaul to make Infosys future-ready. Infosys, much like its competitors Wipro and TCS in India, made a fortune out of IT services outsourced by Western clients. But when cloud computing took off and tech startups all around the globe began innovating and disrupting rapidly, things didn’t look rosy for the first-generation IT behemoth of India anymore.

Vishal took over the reins from Infosys co-founder S.D. Shibulal, who was then the company’s CEO.

The founders – now India’s top tech billionaires – swear by the leadership philosophy of compassionate capitalism, which suggests the highest compensation should ideally not exceed 50 to 60 times of the median salary in a company.

Last year, 27 directors of Infosys took home at least 100 times more than what a typical employee of the company took home. Ten of them earned over 400 times more than the median salary at Infosys.

Full text of the founder’s letter