Infosys CEO Salil Parekh’s compensation has increased 88 percent to Rs 79.75 crore a year, making him one of the highest paid executives in India, as the software services firm justified the fat hike citing industry-leading growth in recent years.
The new employment agreement, subject to shareholder approval, will come into effect on July 2, according to the company’s annual report released on Thursday.
For FY22, Parekh took home a salary of Rs 71 crore, of which Rs 52 crore came from exercising RSUs or restricted stock units granted to him before. Infosys co-founder and chairman Nandan Nilekani voluntarily chose not to receive any remuneration for his services rendered to the company.
Big fat pay hike
Such an enormous salary hike is unusual for a firm that often prides itself on humble origins and middle class background of founders.
The hike announcement comes days after it reappointed Parekh as managing director and CEO for five more years, starting July 1 signaling trust in a leader who turned around the company and restored stability.
The new pay hike will further widen the gap between the CEO and an average Infosys employee. Currently, the ratio of median remuneration of CEO to employees is 229 (excluding stock-based compensation) and 872 (including stock-based compensation).
In a column many years ago, cofounder NR Narayana Murthy had said that giving huge salaries to just the CEOs does not make sense and suggested a ratio of 20 to 25 between the lowest and highest salary.
While IT CEO salaries have been steadily rising, fresher salaries have stagnated in the last decade despite a war for talent and zooming attrition. Salaries of freshers now stand at Rs 3.5-4 lakh annually, an 8-10 percent increase over a decade.
Why Infosys is paying so much
Infosys said that any comparison of CEO salary to the median remuneration should be seen in the context of the company’s strong performance and stock price growth. The firm said it considered key factors such as total shareholder return, rise in market cap and growth while recommending his reappointment and change in remuneration.
“Under his leadership the total shareholder return (TSR) was an impressive 314 percent, the highest among peers. Revenue has grown from Rs 70,522 crore (fiscal 2018) to Rs 1,21,641 crore (fiscal 2022), a compound annual growth rate of 15 percent (versus nine percent for the four years before that) and the profits have also increased from Rs 16,029 to Rs 22,110 crore,” it said.
Further, the company said it has more than doubled the share of digital revenue from 25.5% (fiscal 2018) to 57.0 % (fiscal 2022) and is now considered a leading digital company with industry analysts rating it as a leader in 32 categories. and also signed large deals with a total value of ~ US $39 billion for the four-year period from fiscal 2019 to fiscal 2022.
“The Committee has also recommended a revised compensation structure considering that Salil is not a first-time CEO and MD, as he was at the time of his initial appointment. Salil is the CEO of Infosys, a globally listed entity and has demonstrated successful business and overall performance since his appointment.”
“This growth is accompanied by an increase in the total number of employees from 2,04,107 to 3,14,015 during his tenure. The Company competes with global peers, particularly in North America and Europe, with almost 87% of the Company’s revenue coming from these geographies, and therefore, Salil’s remuneration has to be determined keeping in view international benchmarks,” the annual report said, justifying his pay hike.
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