Five reasons why CEO Vishal Sikka had to leave Infosys

The resignation of Infosys chief executive officer (CEO) Vishal Sikka, soon after he completed 3 years at Infosys, comes as a culmination of an unending tussle between the company board and founder-shareholders, especially N.R. Narayana Murthy, over issues of governance.

Ten of the 16 senior executives Sikka had hired from his previous company, SAP, quit over the past year and a half. Most of them were hired to further his innovation agenda.

The $10-billion company's growth has slowed down sharply after having risen in Sikka’s first two years. Consequently, Infosys’ share price is down steeply from the highs it had touched mid-last year. Sikka has, since the beginning, spoken about a dual strategy—to renew the traditional business with automation, and develop new businesses around the new digital technologies such as cloud, AI/machine learning, analytics, big data, and internet-of-things.

The rift between Sikka, the first non-promoter CEO of Infosys, and a section of the IT major's promoter-shareholders, led by Narayana Murthy, became visible in the beginning of the year as promoters began expressing concerns over what they saw as deteriorating governance and values of the company.

Below are five reasons that have led to Sikka's resignation:

1. Sikka's salary
A sharp increase in Sikka's compensation early last year is said to be the biggest flash-point. The company says Sikka's cash compensation had actually went down and the increase has been primarily in RSUs (restricted stock units) and stock options, which are directly linked to incredibly steep goals. Experts say the Infosys founders' policy of low compensation worked as they had huge equity stock in the company which paid handsome dividends, an advantage that senior executives who joined much after the company's storied IPO, didn't have.

2. Bansal's severance package
Former CFO Rajiv Bansal's large severance pay of Rs 17.4 crore is the cause of another major difference. The company says the employment contracts of key members of the executive team include a severance clause, and such clauses are guided by the complexity of the role as well as country-specific regulations.

3. Appointment of Punita Sinha
Punita Sinha, wife of Jayant Sinha who is Minister of State for Finance, was appointed an independent director last year. The appointment raised concerns with founders but the board says she is eminently qualified for the job.

4. Growth through acquisitions
Sikka has maintained that Indian IT's older businesses of application development & maintenance, infrastructure management and BPO are slowing and the margins are falling. He believes companies need to innovate and offer value-added services. This move also demands significant acquisitions. But sources said that some of the founders are not in favour of acquisition-based business model.

5. Investigation reports
Recently, the rift between the board and the founders widened over investigations into several decisions made by the company. Narayana Murthy wrote a mail to the board, demanding to make the investigation reports public. The reports refer to internal investigations constituted by Infosys after two whistleblower complaints to market regulator Sebi alleged improprieties in its $200 million acquisition of Panaya, questions over the severance payout made to former CFO Rajiv Bansal and alleged excessive expenses incurred by its current CEO Vishal Sikka in Palo Alto.