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Indian CEOs' salaries increase at faster rate than companies' profit, says report

While the overall salaries of employees grew at just 10 per cent a year, the honchos of these listed companies accounted for top-earning heads.

twitter-logo BusinessToday.In   New Delhi     Last Updated: September 14, 2018  | 16:43 IST
Indian CEOs' salaries increase at faster rate than companies' profit, says report

The salaries of Indian CEOs and promoters have seen a rise of around 19.3 per cent per year as compared to average corporate earnings, which grew at 13 per cent, in the past three years. While the overall salaries of employees grew at just 10 per cent a year, the honchos of these listed companies accounted for top-earning heads. The CEOs are prospering in India but there has been no corresponding trickle-down effect. Average salaries of employees in even highly prosperous companies are not increasing the way CEO emoluments are.

A report published in Business Standard cites a survey saying CEOs' salaries increased by whopping 20.4 per cent in FY 18, 13 per cent in FY 17, and 21.6 per cent in FY17. The survey was conducted by evaluating financial details of as many as 172 listed companies, which offered annual compensation of Rs 10 crore or more to their CEOs or promoters. In the past three years, the net sales of the surveyed companies grew at an average of 12.9 per cent, 8 per cent, and -5.5 per cent, respectively. Operating profit of these companies also failed to achieve the similar growth as the salaries of their CEOs and promoters. While these companies achieved operating profits of 15.2 per cent, 14.7 per cent and 3.9 per cent in FY18, FY17 and FY16, growth in their companies' net profit also fell short of the earnings compared to their top bosses.

Experts suggest it shows promoter-CEOs are brazenly taking care of themselves, and pay themselves whatever they feel they can get away with. They suggest companies should decide about their CEOs' salaries considering all financial parameters. Some, however, also feel that additional pressures on Indian CEOs - compared to their Western counterparts - justify their high remuneration.

HR experts say there is no direct correlation between a company's profits and its professional CEO's total compensation. "A significant amount of compensation is linked to the individual's potential in the eyes of the company's board, how it views his/her ability to turn around the company and lead it in the future," they believe.

Top six Indian CEOs who are earning highest annual salaries in India, include CP Gurnani, Managing Director and CEO of Tech Mahindra (Rs 146.1 crore), AM Naik, Group Chairman, Larsen and Toubro (Rs 137.2 crore) Kalanithi Maran (Rs 87.5 crore), Executive Chairman, SUN TV, Kavery Kalanithi (Rs 87.7 crore), Executive Director, Sun TV, Pawan Munjal (Rs 75.4 crore), CMD and CEO, Hero MotoCorp, Sajjan Jindal (Rs 60.5 crore), CMD, JSW Steel/JSW Energy.

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