Infosys, one of the largest IT services company in India, has now dropped its ambitious long-term revenue target of $20 billion. The company’s annual report has no mention of the targeted goals, not even as a footnote, contrary to the detailed description shared in last year’s annual report.
Further, it has also set up a three-member panel to “support and advice” chief executive officer Vishal Sikka in executing strategy. The panel comprises non-executive chairman R. Seshasayee, co-chairman Ravi Venkatesan and director D.N. Prahlad.
The third major development for the IT giant is that it hired search firm, Egon Zehnder, to evaluate each of the 10 members of the company’s board. These three developments are part of steps taken by the board to address criticism from several quarters, especially from co-founder N.R. Narayana Murthy.
Infosys’ decision to award a higher salary of $11 million to Sikka last year was based on its long-term goals of $20 billion in revenue, 30% operating margin and $80,000 revenue per employee by March 2021.
One board member, who spoke on condition of anonymity to LiveMint, admitted that Infosys had pretty much dropped this long-term goal. However, it isn’t clear whether this means the board will review its CEO Vishal Sikka’s salary.
In a statement of company’s annual report for 2015-16 stated:
The committee (nomination and remuneration committee) also noted that the management, under the leadership of Dr Sikka, has drawn up goals for revenue, margins, and revenue per person for the financial year 2020-21, which are expected to be achieved progressively over the next five years.
The committee was of the view that Dr Sikka’s leadership will be essential to achieving these goals, and therefore recommended that Dr Sikka’s contract of employment be replaced with a new contract aligned to these goals, as well as to shareholder value creation.
The review of the board can also be termed as an attempt to introspect, which also presents an opportunity to address issues raised by Narayan Murthy who questioned the credibility of some of the board members and even lambasted some of the decisions made by the board.
Egon Zehnder, which also helped Infosys hire Vishal Sikka in 2014, has also interviewed a few senior executives of Infosys.
Also, Infosys is appointing the three-member committee for strategy, which was announced in the annual report published on 25 May, is an important step because two of the three acquisitions made by Sikka have failed.
Infosys was to pay $120 million to buy mobile commerce firm Skava in 2015, which included $20 million as contingent money or payments dependent upon the achievement of certain financial targets by Skava on 31 December 2017.
For the year ended March, Infosys paid only a third, or Rs 40 crore, of this contingent money. Infosys reversed its entire $5 million in contingent money payable to Noah Consulting, as part of a total purchase price of $70 million.
However, Panaya, which is the first purchase under CEO Vishal Sikka, for $220 million, does not have any provision for contingent payments.
The company’s revenues stood at $10.2 billion in FY17. Vishal Sikka took home $6.7 million in FY17 as against the contracted $11 million as he slipped on mobilizing the company to execute and achieve his initial target of double-digit growth.