Despite burgeoning pay packages, Indian IT CEOs do not have the kind of safety net that their US counterparts enjoy

BENGALURU: While chief executives of information technology companies have traditionally been among the best paid in corporate India, their severance packages have been looking better too, in recent times. For example, Francisco D’Souza of Cognizant is entitled to $24 million (Rs 154 crore) if his employment is terminated without cause, meaning for no fault of his, according to filings with the US Securities and Exchange Commission.

Likewise Vishal Sikka of Infosys is entitled to severance pay that could go up to about $10 million. And that is a quantum jump compared with the package available to his predecessors in the corner office of Infosys. NR Narayana Murthy, Nandan Nilekani, S Gopalakrishnan and SD Shibulal also happened to be the founders of the company, and they were uniformly entitled to just three months of severance pay if their employment was terminated without cause.

Sikka, in comparison, is entitled to 18 months of base pay that will be paid out over a period of 18 months, along with 18 times the liquidated payout in equal instalments over a period of 18 months.

Sikka currently earns about $900,000 in annual base pay and another $4.18 million in annual variable pay, and also is entitled to about $2 million of stock options. Similarly, 10 years ago, D’Souza’s predecessor Lakshmi Narayanan was entitled to less than half that amount of severance pay.

Infosys did not reply to emails seeking comment. A Wipro spokesman said the company had no further comment on the matter, apart from its recent regulatory filing in the United States. Cognizant declined to comment.

In an email, a TCS spokeswoman pointed to the disclosure in the annual report and said, “Your assumption that he is entitled for six months’ remuneration is right.” Despite burgeoning pay packages and severance clauses, some feel that CEOs in India do not have the kind of safety net that heads of US-based companies typically enjoy.

The former CEO of one of India’s top software companies said that while the rules make it easier to hold the chief executive accountable for a company’s performance, the company is not similarly accountable to protect the interests of its CEO. “In Indian companies, CEO contracts can often be relatively vague and they haven’t changed at all over the last decade.

While Indian companies have done great work on beefing up governance over the past 10 years, there is still a big gap in terms of protecting the rights of the CEO,” this person said, requesting anonymity.Severance packages of CEOs of US companies dwarf those of their Indian counterparts. For example, Jack Welch made $417 million when he left General Electric, and Meg Whitman pocketed $120 million from eBay. Golden parachutes of US-based CEOs typically include cash severance, accelerated vesting on stock awards and interest on deferred compensation. In India, since a number of companies typically appoint internal candidates as CEOs, their contracts are more often than not an extension of their existing employee contracts, which typically don’t include the large severance packages enjoyed by their US counterparts.

In 2011, Wipro’s billionaire chairman Azim Premji decided to ditch the joint CEO-model and appointed TK Kurien as the company’s new CEO. Wipro’s joint CEOs Suresh Vaswani and Girish Paranjpe were given severance packages of about $1.55 million -- much lower than what US-based CEOs typically enjoy. The contrast is stark even within IT companies -- between CEOs based in India and those based overseas.

N Chandrasekaran of TCS and TK Kurien of Wipro have severance packages that are a fraction of the size of those handed to USbased D’Souza and Sikka. Former HCL Technologies CEO Vineet Nayar, however, said that in India contracts are trust-based and boards reward CEOs liberally. “Boards go out of the way to take care of successful CEOs by keeping them engaged and compensating them well,” he said.