Infosys inks severance clause, till now available only to CEO Vikas Sikka, in COO UB Pravin Rao’s contract

Infosys inks severance clause, till now available only to CEO Vikas Sikka, in COO UB Pravin Rao’s contract

Infosys has introduced a severance clause in the revised remuneration package for chief operating officer (COO) UB Pravin Rao, an entitlement which was available only to the chief executive officer, Vishal Sikka. “U B Pravin Rao will be entitled to receive severance compensation amounting to nine months’ fixed salary should his employment be terminated without cause,” according to the resolution passed by Infosys Board. Under the revised compensation package for Rao, he will be entitled to a fixed salary of R4.62 crore, variable compensation of R3.88 crore and also stock compensation of R4 crore. The Infosys COO received a total compensation of R9.12 crore excluding retiral benefits for FY16. Infosys CEO was the only executive entitled to a severance pay. The company’s annual report for FY16 states, “None of our directors except Dr Vishal Sikka is eligible for any severance pay.”

In the case of Sikka, the severance pay clauses are very extensive and based on various parameters. The annual report of FY16 states, “We have agreed with Dr Sikka to provide each other with 90 days’ notice of termination as applicable. Dr Sikka may be entitled to severance benefits depending on the circumstances of his termination of employment.”

Severance pay has become a controversial topic for Infosys in the recent days with the founder, N R Narayana Murthy raising questions on the severance package paid to two key former executives of Infosys. He also questioned the rationale for the higher salary package for Sikka amounting to $11 million.

This also led to serious allegations made by an anonymous whistle blower letter which claimed that the high severance package paid to the then CFO, Rajiv Bansal was due to certain impropriety in its acquisition of Israeli company Panaya in February, 2015.

However, Infosys strongly rebutted all the allegations in the letter and has referred it to its audit committee for further investigation.

Meanwhile, the company Board has also recommended to the shareholders for the adoption of new Articles of Association of the company in conformity with the Companies Act, 2013. This gives Infosys room to appoint 15 directors and any increase beyond such limit will require a special resolution in line with the Companies Act, 2013.During the recent controversy surrounding Infosys, there have been also calls for restructuring of the current Board with the induction of new independent members. The current Board of consists of nine members with the last addition being of D N Prahlad.