Shareholders getting more say in CEO remuneration

ET Intelligence Group: From promoter executives of companies to professional CEOs, salaries of senior management at India Inc are undergoing changes to better reflect the performance of the companies and their business environment. Increased regulatory guidelines, shareholder activism and plain economics have been driving this change for some years now. In the latest development, the new CEO of loss-making telecom operator Vodafone Idea will not be paid any remuneration during his current tenure of three years, as per the company’s annual general meeting notice to its shareholders seeking approval for his appointment. In the wake of Covid-19, senior management of several companies took a sharper pay cut than the rest of the staff. In a first, the chairman of Tata Sons and CEOs of all operating companies of the group will take an estimated 20% cut in remuneration — primarily in the current year bonuses. Budget airline IndiGo was slated to impose a second round of pay cuts effective this month with the company’s CEO expected to take a salary cut of 35%.In March, Apollo Tyres announced that both its chairman and its vice-chairman will take 25% cut in their salaries and the company’s senior management will take a voluntary reduction of 15% in their salaries in solidarity. Incidentally, in 2018, the company’s public shareholders had rejected the reappointment and remuneration of the vice-chairman and managing director — eventually approving it only when the overall compensation was reduced by nearly a third.In April, Reliance Industries announced pay cuts with senior executives taking 30-50% salary cuts and chairman Mukesh Ambani forgoing his entire compensation.In contrast to such developments in India Inc, US companies have been found to shield their executives’ compensation from the pandemic’s economic fallout even as they laid off workers. Some companies began reinstating their executives’ pay within a quarter of the cut being announced in solidarity with the workers. 78047475In recent years, CEO pay has come under the scanner globally as institutional investors and proxy advisory firms have become vocal about benchmarking corporate performance to CEO pay. In this regard, annual report disclosures in India such as managerial remuneration and ratio of the remuneration of each director to the median employee remuneration, increase in executive pay versus an increase in median pay provide a glimpse of the divergence between the senior management pay and the average employee remuneration. Dilip Shanghvi, managing director of Sun Pharma, along with his brother-in-law Sudhir Valia, took home ₹1 each as salary in 2018-19, the year when the company faced flak over its corporate governance and underperformance. The Reserve Bank of India, too, has questioned the proportion of managerial remuneration by private sector banks on the grounds of performance. It eventually framed guidelines, effective since April this year, for the remuneration of CEO and directors of private banks that make at least 50% of the pay variable and to be paid based on performance.

from Economic Times https://ift.tt/2FnD9Ne
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