New Delhi: Infosys co-founder N R Narayana Murthy has said that managerial remuneration has to be a fair multiple of the compensation of the lowest level employee in the company. “If the lowest paid employee’s remuneration was Rs 2-3 lakh a year, the CEO remuneration should be Rs 70-80 lakh,” he added.
Speaking at an All India Management Association (AIMA) event here on Monday (September 21), Murthy said that corporate governance levels in India have improved considerably in the last three decades but there have been a few instances of serious governance deficits during the last five years.
He noted that the primary functions of a corporate board include ensuring a robust quality growth of both the top line and the bottom line of the company, protecting and enhancing the reputation of the company as well as reviewing, critiquing, and improving the strategy presented by the management.
According to Murthy, the board needs to recommend a fair and performance-based compensation to the CXOs and other officers of the company after consulting key, knowledgeable shareholders and create a succession plan for the CXOs and key officers of the company.
He further said that the board also needs to identify risks and take timely action to mitigate them, put in place systems of information, control, checks and balances, and make sure that they are working and ensuring full compliance of regulations required by every statutory authority of the land.
Asked about his views on the work-from-home mode being adopted amid the COVID-19 pandemic, Narayana Murthy said he isn’t a “great fan” of WFH.
He further said, “I believe the office is the place to work, home is the place to spend time with your loved ones. Mixing the two is not a good idea on a long-term basis. Yeah, I understand that there is no alternative therefore, we have adapted. But this should be a short-term solution.”
On mergers and acquisitions, Murthy said acquisition strategy should look at complementary strengths, explaining that if the target company adds value in terms of adding strength in a sector, helps bolster presence in geography or has an IPR (intellectual property right) that can be leveraged for accelerating growth of services, then there is merit in such a transaction.
“I am a great believer in the bottom line. I believe in topline, but that topline has to come with a very good bottom line because I used to say that our strategy has been to do whatever is necessary to create sustained differentiation in the marketplace to obtain industry-leading margins…I am not a great fan of acquiring companies that have low margins,” Murthy added.
According to him, Indian IT firms must move from reactive problem solving to having a proactive problem recognition and solution mindset which will help increase its per capita revenue productivity.
Murthy said Indian IT companies will continue to grow anywhere between 7 to 10 percent with operating margins being between 15 and 20 percent.
“I think if the Indian IT industry moves from being reactive problem solvers to proactive problem definers and solution providers, then our per capita revenue productivity will improve. We will become much better known and the growth will be spectacular,” he added.