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Indian CEOs rake in moolah in days of slowdown

While the economy bleeds and confidence slumps all around, India Inc czars’ pickings remain rich.

Published: 12th August 2012 10:21 AM  |   Last Updated: 14th August 2012 11:53 AM   |  A+A-

The Indian economy may be in the doldrums, and getting worse, but for the promoter-owners and professional CEOs of Indian companies, the pickings remain rich as ever. Despite the downturn, salaries of CEOs and CMDs of some of India’s top companies have either grown or have remained stable.

India’s biggest FMCG firm, Hindustan Unilever’s CEO Nitin Paranjpe took a total salary cheque of Rs 9.73 crore in 2011-12, a 23 per cent rise on year from Rs 7.91 crore in the previous fiscal.

Hero MotoCorp CEO and MD earned a whopping Rs 34.47 crore in the fiscal gone by. This is a 28.7 per cent rise in his total earnings compared to Rs 26.47 crore in 2010-11. His father Brijmohan Lall Munjal’s total compensation package stood at Rs 34.43 crore in 2011-12 as against Rs 26.75 crore in the previous fiscal. The rise in salaries for both father and son comes at a time when the entire auto industry is going through tough times.

While the banking sector globally is in the midst of crisis, top honchos of some of India’s biggest private sector banks continue to rake in moolah. 

ICICI Bank CEO and Managing Director Chanda Kochhar’s total compensation in 2011-12 stood at Rs 4.25 crore, which was 33.2 per cent higher than the Rs 3.19 crore she earned in the previous year. Her peer, HDFC Bank’s MD Aditya Puri earned Rs 4.90 crore in the last fiscal, up from Rs 3.92 crore in 2010-11.

At a time when the global economy is desperately fighting a losing battle against slowdown and the Indian economy is struggling to stay afloat, there is a growing feeling worldwide that Big Bosses do not need to be overly compensated for what they do. That is not the case with India Inc, however.

The fact of the matter is that even as bottomlines and toplines of corporate India are shrinking, salaries of top honchos are going north. Except for Bharti Airtel CMD Sunil Bharti Mittal and IT behemoth Wipro’s Chairman Azim Premji who have taken salary cuts, in most cases salaries of Indian CEOs/CMDs have risen (see box: Pocket Money).

Post the Lehman Brothers’ collapse in September 2008 and the ensuing global meltdown, there has been a global debate over the outrageous compensation given to CEOs. The topic is being hotly debated in India too. Two years ago, a parliamentary panel had made a strong pitch for capping salaries of CEOs, suggesting an overall outer ceiling on managerial remuneration. Currently, according to section 198 of the Companies Act, 1956, total remuneration paid to managerial personnel cannot be more than 11 per cent of net profit, while an individual manager’s compensation is capped at 5 per cent of net profit. If a company wishes to break the ceiling, it requires a go ahead from the corporate affairs ministry.

It is just not the government that has been seized of the issue of high compensation of CEOs. In January this year, the Reserve Bank of India too issued guidelines on compensation of CEOs and staff of private and foreign banks. It said, all private and foreign lenders would have to obtain prior approval from it for the remuneration of their CEOs and whole-time directors as per the Banking Regulation Act, 1949, which prohibits excessive remuneration. The guidelines, however, did not specify what constituted ‘excessive remuneration’.

The norms came more than two years after the central bank signalled its desire to frame regulations for salaries of private and foreign bank executives in its second quarter policy review in October 2009. In December 2009, the RBI had sought information from banks on how they decided the salaries and bonuses of people heading the treasury department—a key division responsible for generating a significant portion of a bank’s profits.

A report by global management consulting firm Hay Group in February this year revealed that an average CEO’s compensation in India has crossed Rs 2-crore mark on a cost-to-company basis. “The Indian CEO market has always seen a large pool of operationally excellent CEOs, but a constant scarcity of managing business CEOs has led to high compensation. Compensation is expected to further spiral upwards owing to the increasing cross-sector employability of CEOs,” says Sridhar Ganesan, Rewards Practice Leader, Hay Group India.

A recent global study by HR consulting firm Aon-Hewitt shows that India has the widest gap between the salaries of CEOs and entry-level graduates. In India, a CEO’s compensation is on average 675 times that of the minimum wage earned by entry-level graduates, the study revealed. India is followed by the US, where a CEO typically earns 423 times more than a graduate.

While fat pay cheques and inequalities in salaries are a reality globally, instances like Reliance Industries Chairman Mukesh Ambani foregoing Rs 24 crore of his annual pay in 2011-12 are far and few. In its latest annual report for 2011-12, RIL said Ambani’s total pay package stood at Rs 15 crore, against his eligibility of Rs 38.82 crore, as per the shareholders’ approval.

 

- Sunday Standard

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