February 13, 2017 / 5:49 AM / 6 months ago

Infosys management seeks to ease tensions with founders

FILE PHOTO: Infosys Chief Executive Vishal Sikka listens to reporters' questions during the announcement of the company's quarterly results at its headquarters in Bengaluru, India, October 14, 2016.Abhishek N. Chinnappa/File photo

MUMBAI (Reuters) - Management at Infosys Ltd attempted on Monday to allay concerns that the software services firm was facing a worsening dispute with its founders over how the company was being run, saying that the board was engaging with the founders, including N.R. Narayana Murthy.

India's second-biggest IT services company behind Tata Consultancy Services has been locked in a public war of words with the founders and former executives, who, led by Murthy, have raised concerns over various decisions taken by the board.

The founders, who still own 12.75 percent of the firm, have questioned a pay rise granted to Chief Executive Vishal Sikka and the size of severance payouts given to others, including its former finance head Rajiv Bansal.

Addressing a news conference in Mumbai, the company's non-executive Chairman R. Seshasayee sought to defend the current management and said improvements in the company's policy on severance payments had already been drawn up.

"I must say that I don't look at this as a battle," Seshasayee said. "For sure you will have differences in views, differences in perceptions, differences about business judgments and it is our job as members of the board to be open to and to listen to all interests."

At a separate investor conference in Mumbai earlier on Monday, Sikka called Murthy an "incredible man" and said that he had a "wonderful" relationship with the founders. He dubbed issues raised in the media around corporate governance lapses at the firm as "distracting".

The row comes at a time when the more than $150 billion Indian IT services industry has seen a slowdown in new deals with Western clients, and is bracing for changes in U.S. work visa rules in its biggest market, the United States, that could increase costs significantly and dent profits.

PRIVATE JET

Sikka, a former member of the executive board at German software firm SAP, took the top job at Infosys in 2014, becoming the first CEO not to be a founder. Later that year Murthy voluntarily gave up his board position.

One of the sore points between the board and the founders has been the salary of Sikka - who is due to get as much as $11 million based on Infosys's financial performance in the current year ending next month. The founders have also opposed the use of chartered jets by Sikka, according to media reports.

Seshasayee said Sikka's fixed pay had come down, while the variable component rose, adding that the variable pay was linked to performance and his length of service with the company.

Less than a tenth of Sikka's travel was by chartered planes, Seshasayee said.

He also said the company eventually paid about 50 million rupees ($746,000) to former finance chief Rajiv Bansal, against about 174 million rupees agreed initially. Large severance payments are rare in India, and founder Murthy had questioned the move.

The severance pay issue was a "lesson" for the company which has since then adjusted its practices, Seshasayee said. Infosys was also using law firm Cyril Amarchand Mangaldas to help with succession planning at board level, he said.

NOT ANOTHER TATA

Investors have worried that the dispute over how Infosys is being managed will turn as ugly as it has at Tata Sons, India's biggest conglomerate, where Cyrus Mistry is taking legal action following his ousting by other shareholders as chairman.

Sikka's comments on Monday seemed to soothe investors, with Infosys shares rising to 1.7 percent in Mumbai trading to their highest level in a month. The company's New York-listed shares were up 1.1 percent at $14.66 by 1711 GMT.

"Probably this is not going to precipitate into something like the Tatas," said R.K. Gupta, managing director at Taurus Asset Management, which owns Infosys shares.

Responding to a query on a potential share buyback, another concern raised by some former executives, Sikka said Infosys would weigh up possible buybacks against the company's business needs and the use of capital for potential acquisitions. The company was sitting on a cash pile of more than $5 billion as of Dec. 31.

($1 = 67.0350 Indian rupees)

Additional reporting by Promit Mukherjee, Abhirup Roy, Swati Bhat; Writing by Devidutta Tripathy; Editing by Muralikumar Anantharaman, Greg Mahlich

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