NEW DELHI: India Inc’s ire at corporate affairs minister Salman Khurshid for his remarks that CEOs should not earn ‘vulgar’ salaries appears to be misplaced.
Instead of shackling CEOs’ salaries, Mr Khurshid and his ministry have left it to individual companies and shareholders to determine what would be considered adequate remuneration.
In September, the minister had clearly stated that it was not for the government to determine salaries of India Inc’ brass, a sentiment that is reflected in the Companies Bill, 2009.
The legislation, which is currently being examined by a parliamentary panel, does away with the cap in the present act. The Companies Act, 1956, which is the law in force, sets a ceiling on managerial remuneration, not more than 11% of the net profits of that company for that financial year. Salaries of top company officials is capped at not more than 5% of the net profits for a whole-time/managing director and not more than 10% if there is more than one. Companies are required to approach the government for permission in the event they want to exceed this cap.
By contrast, the Companies Bill, 2009, which is being examined by the Standing Committee on Finance, does away with these caps.
Section 175 of the proposed law states that a managing director or whole time director or manager of a company may be remunerated either by way of a monthly payment or at a specified per cent of the net profits of the company.
Mr Khurshid maintains that it is for shareholders of a company to determine salaries of the top executive. And by doing away with this cap, the government has sought to pass on the decision on CEO compensation to shareholders.
There appears to be some concern in the industry that given the global environment on the issue, the repercussions would be felt in India as well. The idea of curbs on salaries of corporate top brass was echoed at the Group of 20 meeting in September.
In the developed world, excessive compensation and multi-million dollar bonuses to executives have sparked an outrage, especially after the bloodbath on Wall Street last year. For the Indian industry, apprehension is that its salaries will get caught in the austerity drive that is now on in the government.
This is not the first time that there has been an uproar over compensation given to corporate top brass. In 2007, Prime Minister Manmohan Singh asked business leaders to avoid ‘excessive remuneration’ and to ‘discourage conspicuous consumption,’ warning widening inequalities could lead to social unrest.
Source : https://economictimes.indiatimes.com/news/politics/nation/India-Inc-should-say-thank-you-Salman/articleshow/5095921.cms
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