Infy justifies COO Rao’s pay hike, says effective rise only 1.4%
BENGALURU: Infosys on Monday defended the hike in the compensation of chief operating officer UB Pravin Rao, saying the revision was arrived at after benchmarking against peers.
On the objections raised by co-founder and former chairman NR Narayana Murthy, the country’s second-largest software exporter said it views Murthy’s statement as “important feedback” and will continue to work with stakeholders to ensure longterm interest of the company.
“Giving 60% to 70% 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 not proper. This is grossly unfair to the majority of employees...,” Murthy said in a letter.
Justifying the over 33% hike in Rao’s compensation, Infosys said the cash component has decreased from ₹5.2 crore to ₹4.6 crore and it is only the performance-based component that has been raised from 45% to 63%. Considering the four-year vesting period of the stocks given to Rao, the hike came to just around 1.4% for 2017-18, it added.
Meanwhile, echoing Murthy’s view, former CFO V Balakrishnan and ex-director TV Mohandas Pai on Monday said a pay hike for a top executive is “terrible for any leadership” when subordinates were being asked to “sacrifice” on wages, and in this particular case, the salary is “spectacular” but performance is not.
Balakrishnan reiterated the need for reconstituting Infosys’ board, stating that the golden standards of governance and value system the company was known for was “being decimated under the current leadership”.
“I tell all subordinates that you have to sacrifice and you have to make sure your wage increase will be less, we have to cut costs while I will take 40-50% raise (in compensation), I think it is terrible for any leadership to do,” the former Infosys chief financial officer (CFO) told ET Now.
Alleging that Infosys’ board was “misguided”, Pai said the “”fundamental problem” was the pay hike given earlier to CEO Vishal Sikka “without any justification”, because of which other executives were also expecting higher pay. “I totally agree with Murthy that it was not proper. We should have Indian norm for compensation; we can’t follow American norm, we (Infosys) are not an American company.” MUMBAI :The government is considering a new and potentially more attractive equity savings scheme to replace one that was scrapped this year following a tepid investor response.
The new scheme will offer more flexibility and greater limits than the Rajiv Gandhi Equity Savings Scheme (RGESS), said two people with direct knowledge of the development.
For one, the government is looking to enhance the investment limit eligible for tax benefits under this scheme to ₹2 lakh, four times the RGESS limit. Secondly, the stringent entry norms prescribed by RGESS may be done away with, these people said on condition of anonymity.
The RGESS was open to new investors who either didn’t have a demat account or hadn’t done any transactions even if they had one. This, plus a lot of other conditions, meant that the scheme had just around 57,000 accounts with an investment corpus of ₹154 crore, data with depositories showed. In comparison, the mutual funds industry, which manages ₹18 lakh crore, has 13.1 million systematic investment plan accounts.
“RGESS was too complicated and restrictive for the amount of tax benefits allowed. The government has taken recommendations from various market participants, regulators and depositories,” said the first person.
He added that the government had not specified a time frame for launching the new scheme. Despite previous efforts, retail investors have not really taken to equities, especially since being singed by the 2008-09 market crash in the aftermath of the North Atlantic financial crisis. While there are 27 million demat accounts in India, around half do not have any balance and threefourths of the rest do not trade, according to a depository official, who didn’t wish to be identified.
“Under the new scheme, even the existing demat account holders in the retail space, with average annual transactions up to a certain limit, may be allowed to invest and avail tax benefits up to a limit,” said the second person.
One thing which will remain the same, however, is the maximum gross annual income for tax benefits, which will remain at ₹12 lakh. However, other conditions such as the lock-in period for availing tax benefits may be relaxed, these people said.
Under RGESS, an investor had to invest for three straight years and hold these for at least three years to get tax breaks.
“The whole scheme (RGESS) was badly planned,” said Prithvi Haldea, chairman and MD of Prime Database, a New-Delhi based primary market analytics firm, citing the definition of new investors and the limited universe for investment — only BSE 100 stocks were allowed initially and later, some mutual funds and exchange-traded funds.
“Tax incentives should not be given to draw people into equities and that too for trading and not capital formation. However, it is a fact that we need a huge number of investors to come to the market. So, instead of drawing people to trade in limited number of listed stocks, the government should have focused on bringing in investors for IPOs.”