Infosys CEO contract leaves no room for Sikka-like spat
BENGALURU: Infosys Ltd, under chairman Nandan Nilekani, appears to have drawn lessons from the ugly public spat with its first non-founder chief executive to draw a contract with current chief Salil Parekh that leaves little scope for potential disagreements or legal trouble.
This development underlines the new board’s decision to keep at bay all potential conflicting issues raised in the past, including a few tetchy issues in former CEO Vishal Sikka’s employment contract .
“Obviously now, Infosys has learnt from their experiences with the first non-founder CEO Vishal Sikka and have structured a tighter and transparent employment contract with Salil Parekh,” said Shriram Subramanian, managing director of proxy advisory firm Ingovern Research Services.
An email sent to Infosys seeking comment went unanswered.
The firm, however, has still not spelt out the metrics based on which Parekh will be paid his variable pay. Four features stand out in Parekh’s 14-page employment contract, which has not been made public and was reviewed by
First, Parekh is not assured of any minimum salary as part of his compensation structure. In contrast, Infosys had agreed to pay Sikka $10 million in annual compensation, irrespective of the firm’s performance. Parekh, in comparison, can earn as much as ₹17.3 crore, including fixed salary and variable pay, in the first full year. His earnings could possibly double to ₹35.25 crore in the year ended March 2021, provided he steers the company well.
Second, a “Release of Claims” condition ensures that Infosys does not have to pay more than the promised severance to Parekh, in case the board ends his tenure before 2023. Sikka’s contract did not have such a clause.
“The Release of Claims clause, although pretty common globally, is probably the first time an Indian firm has got it included as part of an employment contract,” the head of an executive search firm said on condition of anonymity.
Infosys pays considerably less in severance payment to Parekh than what it had committed to pay Sikka. Parekh stands to get half of his full-year fixed and variable pay, as against Infosys agree- ing to pay two years of fixed and variable salary to Sikka.
Third, Parekh cannot work with eight IT firms, including Tata Consultancy Services Ltd, Accenture Plc and Parekh’s former employer, Capgemini SE for six months from the time he leaves Infosys. International Business Machines Corp., Cognizant Technology Solutions Corp., Wipro Ltd, Tech Mahindra Ltd and HCL Technologies Ltd are the five other companies. Sikka did not have a non-compete clause.
Finally, Infosys has spelt out the process of arbitration, in case of any dispute with the CEO. Both Infosys and Parekh have agreed to abide by a three-member arbitration panel’s decision and not to contest the panel’s verdict before any court. Sikka’s employment contract did not specify details of the arbitration process.