Mukesh Ambani, chairman and managing director of Reliance Industries took a salary of Rs 15 crore during 2008-09, which is 65.9% less compared to the previous year. However, most of the CEOs have seen a hike in their salaries during 2008-09. The Companies Act, 1956 sets a ceiling on managerial remuneration, and says that it must not be more than 11% of the net profits of the company for that financial year.
A study by FE Research Bureau reveals that in 323 companies, 27 CEOs get more than 11% of their companies' net profits. Vinod Juneja of Binani Metals, P Nataraj of KPR Mills, Shravan Shroff Of Fame India and Subhash Ghai Of Mukta Arts are a few names that come to mind. The study also reveals that the total salary of top 323 companies' executives (chairman and MD) increased by 9.96% to Rs 1,104 crore during 2008-09 from Rs 1,004 crore during 2007-08. Sales of the companies increased by 19.5% to Rs 10.10 lakh crore during 2008-09.
However, net profits of these companies decreased by 8.3% to Rs 1.12 lakh crore during 2008-09, while the staff cost of these companies increased by 21.5% to Rs 81,873 crore during 2008-09 from Rs 67,400 crore during 2007-08. The average share of total CEOs' salaries in the total net profit of 323 companies marginally increased from 0.82% during 2007-08 to 0.98% during 2008-09.
The salaries of some major companies' CEOs, in percentage terms, has grown at a higher rate between 2008-09 and 2007-08 compared to an increase in net profit during the same period. Naveen Jindal (exec vice-chairman and MD of Jindal Steel), Vivek Jain (MD of Gujarat Fluorochem), HK Mittal (chairman and MD of Mercator Lines) and S Ramadorai (MD and CEO of TCS) are a few such CEOs. Naveen Jindal's salary increased by 67% to Rs 28.28 crore during 2008-09 from Rs 16.93 crore during 2007-08. This, while the sales and net profit of Jindal Steel increased by only 43.3% and 24.2%, respectively, during the same period. The share of salary to net profit also increased from 1.37% to 1.84%, while the staff cost of Jindal Steel increased by 16.8% during the above period.
A trend, quite opposite in nature, was seen in the case of Brijmohan Lall Munjal Of Hero Honda Motor, Gautam S Adani of Mundra Port, Reji Abraham of Aban Offshore and H M Bangur of Shree Cement. The salary of Brijmohan Lall Munjal increased by only 18.3%, as against an increase of 32.4% in the net profit of Hero Honda Motors. So, the salary to net profit decreased from 1.73% to 1.54%. The staff cost of Hero Honda Motors has increased by 15.4% to Rs 371 crore during 2008-09.
The top five CEOs during 2008-09, according to pay packages, are Kalanithi Maran (chairman andMD of Sun TV Network), Anil D Ambani (chairman of Reliance Communications, R Ramasubrahmaneya Rajha (chairman andMD of Madras Cement), Naveen Jindal (exec vice-chairman andMD of Jindal Steel) and Vivek Jain (MD of Gujarat Fluoruchem).Among them, the highest increase in pay package during 2008-09 was seen in the case of Naveen Jindal.
An interesting feature is that the salaries of some CEOs have increased significantly despite a decline in their net profit. Onkar S Kanwar (chairman andMD of Apollo Tyres, Bhagirath Arya of JBF Industries, Arun Mehta, chairman andMD of Varun Shipping and R C Mansukhani, chairman of Man Industries may be cited as examples.
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