Infosys CEO Salil Parekh to draw lower salary than Vishal Sikka
Parekh — with fixed salary of Rs 6.5 cr and variable pay of Rs 9.75 cr — gets a package that is considerably smaller than the Rs 70.4 cr pay package for Sikka.
Parekh — who will be paid a fixed salary of Rs 6.5 crore and be eligible for variable pay of Rs 9.75 crore this fiscal year — gets a package that is considerably smaller than the $11 million ( Rs 70.4 crore) annual compensation for predecessor Vishal Sikka.
“This is a salary package worked out with Parekh, and so obviously it was mutually accepted,” said Kiran Mazumdar-Shaw, a member of the Infosys board who chairs the nomination and remuneration committee.
Shaw said the two salaries should not be compared as, typically, “salaries are very individualistic”. “Sikka’s salary was benchmarked to his expectations and what he was earning at SAP and Parekh’s salary is also benchmarked to his expectations,” she said.
Parekh took charge as CEO of India’s second-largest software exporter on January 2, he was earlier a senior executive at French outsourcing major Capgemini, where he oversaw banking and financial services and played a key role in the acquisition of software services firm iGate.
Sikka left German software maker SAP as head of products and innovation to join Infosys in 2014. He quit abruptly last August after months of friction between the company’s founder and the board over alleged lapses in corporate governance.
Among other charges, founder NR Narayana Murthy had also castigated the Bengaluru-headquartered company for not being transparent in its employment contract with Sikka, and for paying overly generous salaries and severance packages, including promising Rs 17.38 crore in severance to former CFO Rajiv Bansal.
To be sure, Sikka, who had a higher package, ended up taking home just half of it due to the company’s poor performance. He was paid $6.7 million in fiscal 2017 as against the contracted $11million.
Governance experts said this time around Infosys has been cautious in the manner in which it plans to reward its new leader.
“This time there is more transparency around the compensation, the vesting period for stock options and severance. This compensation seems to be benchmarked to peers and is largely performance-linked,” said Shriram Subramanian, founder of InGovern Research Services.
Parekh, who has been appointed for a five-year term, will also receive Rs 3.25 crore in restricted stock units, Rs 13 crore in annual performance equity grants and a one-time equity grant of Rs 9.75 crore. The performance equity grant begins to vest after three fiscal years, the first of which concludes on March 31, 2021. The other grants vest in tranches each year.
“It is always good corporate governance to have deferred payments. Because if all my stocks vest in year one then will I work for the short term. A long-term view is a good method of compensation,” said JN Gupta, managing director of Stakeholder Empowerment Services.
Sikka’s $11million (Rs 70.4 crore) annual compensation included a fixed component of $3 million (Rs 19.2 crore), a basic salary of $1 million (Rs 6.4 crore) and $2 million (Rs 12.8 crore) worth of restricted stock units.
In addition, he was entitled to $8 million (Rs 51.2 crore) in non-fixed pay, including $3 million (Rs 19.2 crore) in variable pay and $5 million (Rs 32 crore) worth of performance-based equity and stock options.
Executive search experts said Parekh’s salary — as published by Infosys in a postal ballot on Wednesday night — is competitive.
“Many times, compensation is typically benchmarked to what the person was earning before. From this perspective, I do not see anything unusual.
Vishal Sikka may have had a different context. This (Parekh’s compensation) is a very good compensation level,” said K Sudarshan, managing partner for India at executive search firm EMA Partners.
Indian companies typically pay less than their foreign counterparts. SES’ Gupta said that in both cases the minimum compensation was around the same amount while Sikka’s salary was higher as he was based in the United States.
Parekh will also receive less in severance, if he resigns with good reason, than what Sikka’s contract allowed. His severance amount will be equal to 50% of the fixed pay, and 50% of the bonus paid in the previous 12 months. In addition, the company will accelerate some of his outstanding equity grants.
Sikka’s contract made him eligible for base pay plus 24 times the liquidated payout, paid in equal instalments over 24 months.