The annual results of companies listed on the exchanges have started trickling in and one of the key numbers tracked always is the remuneration paid to chief executive officers (CEOs) of large corporations.
This year the statistic is significant as the pandemic led to job losses, pay-cuts and no appraisals across companies.
Despite the pandemic, the combined net profit of the listed companies was up 57.6% to Rs 5.31 trillion in FY21 mainly due to savings in operational costs as staff moved to work from home. As a result, corporate profit share in India's gross domestic product hit a 10-year high of 2.63%.
Highest and lowest paid CEOs and promoters
Information technology companies and companies in the metals sector lead the pack in salary increments to their CEOs. IT companies have done exceedingly well as the whole world moved online from offices to schools to fitness classes to grocery / vegetable purchases, etc.
A super cycle in the commodities space due to supply side bottlenecks and good demand after the resumption of economic activities have pushed up the prices of metals.
Amongst the professionals, Thierry Delaporte (ex-COO of Capgemini), who was appointed as the CEO of Wipro last year, draws the maximum salary of Rs 64 crore. While the company's net sales have been relatively flat during FY 20-21, its net profit has declined by 10%.
Salil Parekh, CEO of Infosys has seen his salary increase by 44% during the pandemic. During the same period, the company's sales and profits declined by more than 10%.
Rajesh Gopinathan, CEO of TCS, witnessed a salary hike of 52% to Rs 20 crore. On the profit front the company's numbers were flat compared to previous year which is a big feat in itself.
Suresh Narayan, CEO of Nestle, reported a marginal increase in salary of 6%. Company’s sales as well as profits declined by more than 5% as consumers held back on discretionary and high end FMCG item purchases.
Tata Steel’s TV Narendran’s salary increased by 35% to Rs 15 crore. The company recorded substantial turnaround in the pandemic year with sales increasing by 5% and profit zooming by 700%.
Top leadership of two companies Hindustan Unilever (HUL) and Indian Hotels (IHCL) reported a decline in salaries.
While Sanjiv Mehta’s (CEO, HUL) salary was reduced by 21%, Puneet Chhatwal’s (CEO, IHCL) salary declined by half. The travel and tourism industry was one of the worst affected sectors in the pandemic year. IHCL’s revenues declined by more than 50%, while it recorded a loss. HUL’s sales as well as profits declined by 15% each.
Sunil D’Souza, who joined Tata Consumer last year, was one of the highest paid CEOs drawing a salary of more than Rs 10 crore.
Performance of these companies
Source: Annual Reports, NSE / BSE Filings | *Made losses during the year.
Amongst the promoters, Mukesh Ambani, didn’t take any salary for FY 20-21 in the wake of the pandemic. This is a nice gesture from a statesman entrepreneur.
On the other hand, Rishad Premji’s salary has more than doubled during the last year. However, his salary is still amongst the lowest in the list. The high increase is also due to a low base effect as his salary was just Rs 5 crore last year.
Apart from sales and profitability, share price performance is also tracked as a metric to evaluate CEO performance. The share market crashed in March, 2020, before the onset of this financial year on April 1. The markets have almost doubled from the lows witnessed in March.
As such, most companies in the list above show more than 100 percent increase in their share prices. Only companies like HUL, Nestle and IHCL have witnessed lesser increase in share prices. This metric is thus not so reliable in this extraordinary year.
All companies have not yet released their annual reports and it remains to be seen whether the Munjals (Hero Group), the Bajajs (Bajaj Group), Mittals (Bharti Airtel), Marans (Sun TV), Adanis (Adani Group), Jindals (JSW Group), Goenkas (RPG Group) of the world, have taken increments or pay-cuts during this tough year.
Amongst the professionals, numbers are awaited for CP Gurnani (CEO, Tech Mahindra), SN Subrahmanyan (CEO, L&T), Ganesh Nayak (ED, Cadila), NV Ramana (ED, Divi’s Lab), Rajeev Jain (Bajaj Finserv), Satish Pai (MD, Hindalco), Kaizad Bharucha (ED, HDFC Bank), who were amongst the highest paid executives in the previous year.
Whether such high CEO pay is justified remains the subject of a fierce debate. On the one hand, free market economists argue high executive pay is justified, while, on the other hand, many wonder if the top earners are really worth it! More on this later...