The Infosys way of creating millionaires

Infosys Technologies Ltd has given away stock options worth Rs 50,000 crore, or over $10.5 billion (at current market prices), to its employees since its inception 30 years ago.

“I do not think any other company has given away” so much of shares to its employees, said Mr N. R. Narayana Murthy, Chairman and Chief Mentor, Infosys, in his last article, in the company's annual report for 2010-11. Every Indian employee at every level who joined the company on or before March 2010 is a stakeholder of Infosys.
ESOPs

The IT giant had put in place the 1994 Employees Stock Option Scheme (ESOP), which along with the 1998 American Depository Receipt scheme and the 1999 scheme, gave shares to over 18,000 employees. This created hundreds of dollar millionaires and thousands of rupee millionaires. Drivers, office assistants and secretaries got shares along with others and became millionaires. It soon became the most successful scheme in India and set a benchmark for other companies.

“It [ESOP] gave us a unique positioning, democratised wealth and suddenly the professionals realised that they too could become wealthy by ethical means early in their careers,” Infosys' annual report said.

The 1994 ESOP scheme was sought to be taxed in the hands of the employees and after a legal battle, the Supreme Court held in 2008 that the scheme did not create a taxable event, allowing all grantees the benefit of no tax, helped the course by the abolition of capital gains tax on sale provided the shares are held for more than 12 months.
Completing 30 years

Come July 2, Infosys will be a 30-year-old IT company, which was incorporated on July 2, 1981, with Mr Narayana Murthy borrowing Rs 10,000 from his wife. The company has now a balance-sheet of Rs 26,000 crore with Rs 11,623 crore paid out as dividend, according to the annual report.

Since inception it has been a remarkable journey so far for Infosys in all major factors. In the last 30 years, the company has grown from 50 customers to 620 customers; from 10 projects to 6,500 projects; from 100 employees to 1,30,820 employees; from 100 sq ft to 28 million sq ft; from 100 investors to nearly 4.50 lakh investors.

The company said that such a scalability exercise has been successful due to its PSPD (Predictability of revenue; sustainability of such predictability; profitability of such realised revenue and de-risking).

Separation

On separation from Infosys, Mr Murthy, who is retiring as the company's chairman and chief mentor on August 21, wrote: “The best analogy that I can think of for this separation between Infosys and me is that of one's daughter getting married and leaving her parents' home. Yes, the parents will be there when she needs them and they will be happy that she is starting a new life in an exciting new environment.”

“The Infosys journey has been an integral part of my life. Most of my colleagues say that Infosys is an inseparable part of me and I am an inseparable part of Infosys. I have been the number one actor in every major decision taken in the company,” he said.

Mr Murthy said: “It is not easy for me to write my last article in the annual report of the company. As I write this, a mosaic of images from the past whizzes through my mind. The list seems endless and it would be difficult to narrate them all in this article.”