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CEOs' pay hikes beat their firms' profit growth

NEW DELHI: Corporate bosses patted themselves on the back for the strong earnings of their companies, with every fourth member in a list of 100 top-paid executives more than doubling their pay packages last fiscal year, says an ET study.

Top executives on the list, which reads like a who's who of India Inc, reeled in multi-crore remunerations for their efforts while overlooking the role of a recovering economy. The robust earnings of their listed companies are likely to muffle the howls of protests to claw back excessive management pay, despite a stark mismatch between the rise in salaries and growth in profits.

 Executive pay rose 33% against 25% profit growth in 2009, a year in which many companies froze salaries, though it is not clear how many of the firms on the list had refrained from increasing employees' pay. The data for this study was collected from disclosures to stock exchanges and companies' reports.

The list of executives who topped the biggest paydays last year include Apollo Tyre's Onkar Kanwar, JSW Steel's Sajjan Jindal, Amara Raja Battery's Jayadev Gala, Crompton Greaves' Gautam Thapar, Wipro's Azim Premji, JK Tyre's Raghupati Singhania and Godrej Consumer's Adi Godrej. Their remuneration includes salaries, incentives and a commission paid out of profits.

"It is now almost an unwritten rule that companies with billion-dollar revenues or a market-cap of a couple of billion dollars would command million-dollar compensations," says R Suresh, managing director at headhunting firm Stanton Chase India.

Two-thirds of the top-paid execs pocketed $1 million or more, compared to less than half the number the previous year. While in some cases, the staggering pay rise for top management kept pace with sharp uptick in earnings, the average pay raise of Hewitt Associates had said in a report last October that the average pay rise in India in 2009 was 6.3%. This indicates that companies were quick to reward the big shots, while other employees were given a reasonable salary hike only early this year. The aggregate wage bill increase of companies represented by these executives rose just 5%.

Companies are linking profits with remuneration and if one looks carefully, it is the variable proportion of compensation that increases every year, much higher than the fixed component, says Essar group president-HR Adil Malia. "The message is clear —if you create more value, if you make a business successful, you get higher rewards," he said.

For instance, after Apollo Tyres became the largest Indian tyre company by revenues after multiple overseas acquisitions, the salary of chairman and managing director Onkar Kanwar doubled to Rs 3.6 crore. The commission paid to him out of profits more than tripled to Rs 18.5 crore. Counting the contribution to provident fund and perks, Mr Kanwar encashed a total of Rs 29.69 crore for the year to end-March compared to just Rs 9.2 crore the previous year.

The list is headed by Sun TV's husband-wife duo Kalanithi and Kavery Maran, who received Rs 37 crore each for the year to end-March, but their pay remained the same as the previous year.

If payments other than salaries were to be counted, former Ranbaxy chief Malvinder Singh could emerge as the executive with the highest remuneration. The billionaire, who sold his drug company to Japan's Daiichi Sankyo in 2008, earned more than Rs 10 crore for the first five months of 2009 before stepping down as the chairman, managing director & CEO in May 2009.

This was in addition to Rs 15.5 crore as gratuity and leave encashment as well as a severance package of Rs 48 crore, among the biggest payments to a departing executive in the country. All these amounts took his total payout to more than Rs 73 crore.

 Mr Singh's big payday nearly equals the combined remuneration of the Marans and vaults him past what Reliance Industries chairman Sunil Mittal besides Hero Honda's father-son duo Brijmohan Lall and Pawan Munjal.

HR consulting firm Cerebrus Consultants founder Anita Ramachandran says with the economy back on track, companies who gave out attractive pay hikes to senior executives and directors in 2009 are likely to do a repeat. It remains to be seen whether directors take a cut above the rest this year, too, as surveys by consulting firms Hewitt Associates and Mercer pencil the average salary hike in 2010 at 10.6% and 11.6% respectively, almost twice that of last year.