India's second largest software services firm Infosys Ltd. on Thursday hiked the remuneration of its chief executive officer Salil Parekh by 88%, citing strong performance of the company and increase in shareholder value under his leadership.
This comes days after Parekh was re-appointed as chief executive officer and managing director of the IT giant for a period of five years.
The board of directors of the company executed a new employment agreement in relation to reappointment of Salil Parekh as MD and CEO of Infosys commencing from July 1, 2022 to March 31, 2027, on the recommendations of the nomination and remuneration committee, the IT firm says in its annual report.
Almost 97% of the increase in Parekh's proposed annual remuneration is linked to performance. Under the revised remuneration, the Infosys CEO's fixed compensation shall constitute less than 15% of this total compensation at target (compared to 23% under his current terms). An annual salary of ₹8 crore will be payable as fixed pay.
Additionally, 70% of Parekh's performance-based compensation is given in the form of restricted stock unit (RSU) or performance stock unit (PSU) grants, depending on the performance of the company's share price.
Parekh will be granted around 2,21,000 PSUs worth ₹34.75 crore for the fiscal 2023 performance, which is a similar number to the 2,17,200 (adjusted for bonus shares) PSU grants (₹13 crore) that he got in his first year of appointment, reflecting the substantial value accretion to the company's share price.
"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 company says. "Salil's proposed total target remuneration vis-à-vis the remuneration most recently paid to CEOs of the peers (based on publicly available information as analysed by the company's external advisors Egon Zehnder) would be around the median."
Under Parekh's leadership, the company's total shareholder return (TSR) was an impressive 314%, the highest among peers, and was well above the TSR (in INR) of benchmark indices of Nifty at 77% and S&P 500 at 117%, Infosys says while justifying the revised remuneration of its CEO. In comparison, during the preceding four-year period, prior to his appointment, the company's TSR was 30% as compared to the peers' median TSR of 47%.
Infosys' market capitalisation increased during Parekh's tenure to around ₹5,77,000 crore ($69 billion).
During the tenure of its current CEO, the revenue growth of Infosys has accelerated from ₹70,522 crore in the financial year 2017-18 to ₹1,21,641 crore in FY22, clocking a compounded annual growth rate (CAGR) of 15%. CAGR for the prior four years stood at 9%.
Profits have also increased from ₹16,029 crore in FY18 to ₹22,110 crore in FY22, the company says.
"These results were delivered under the Navigating your Next strategy, led by Salil, comprising scaling digital revenue, accelerating the core, localization and reskilling, which has resulted in an increased market share in a highly competitive environment," the IT major says.
Infosys has signed large deals with a total value of $39 billion for the four-year period from fiscal 2019 to FY22. The company has more than doubled the share of digital revenue from 25.5% in FY18 to 57.0% in FY22. It has also increased the number of $100 million clients from 20 in FY18 to 38 in FY22.
Infosys says the company has demonstrated successful business and overall performance since Parekh's appointment, adding that this growth is accompanied by an increase in the total number of employees from 2,04,107 to 3,14,015 during his tenure.