Should CEO salaries be proportionate to the size of their companies?
Vivek Sharma
04 September 2007
Mumbai: Many newspapers yesterday carried a news agency story on senior management compensation in India. Most readers would have seen the sharp rise in pay levels as an upshot of the spectacular growth achieved by some of these companies in recent years, while some of them would definitely have winced at the ''obscene'' amounts of money that certain CEO''s take home, while young corporate stars must be dreaming of the day when their names also find a place in the list.
We don''t know how the prime minister, who talked against very high management salaries earlier this year, reacted to this report. May be, at an appropriate event, he may gently remind the private sector to be more sensitive to the UPA''s aam aadmi policies.
The prime minister''s good friends, Messrs Karat, Bardhan & Co, have also not reacted so far. Maybe, the issue of local fat cats pocketing a high slalries pale in significance when compared to the mother of all battles to save the country from American imperialist designs!
When it comes to CEO compensation, Mukesh Ambani is ahead of others with an annual salary of nearly Rs25 crore. After all, he runs the most valuable Indian company and biggest private sector company in terms of annual revenues and profits.
Reliance Industries has been one of the biggest wealth creators for shareholders over the last two years. It can be argued that Ambani''s salary at slightly over $6 million is not very high for the CEO of a large Fortune 500 company growing at a fast clip. CEOs of global companies of comparable size certainly take home much more. It can also be said about others like Bharti Airtel''s Sunil Mittal, who has led their companies to become industry leaders and where investors have profited immensely.
But, can CEO''s of smaller companies with less complex business models justify disproportionately high compensation? Closely following Mukesh Ambani in the list are Kalanidhi Maran and his wife Kaveri Kalanidhi of Sun TV, who took home more than Rs23 crore each last financial year.
Assuming they have no other sources of income and their kids are not yet such super-earners, their annual family income is more than Rs46 crore or $11.5 million. The Kalanidhi family could possibly be the biggest earning resident household in the country. That is impressive!
Sun TV''s businesses, both television broadcasting and cable distribution, was built up with generous political patronage from the DMK, one of the leading political parties in Tamil Nadu. Sun''s promoters also enjoyed significant influence at the centre, as Kalanidhi''s father Murasoli Maran and brother Dayanidhi Maran were both cabinet ministers in different governments.
True, Kalanidhi did manage to expand his broadcasting business in other southern markets. But, without his strong base and cash flows from the Tamil market, he would have struggled to become the dominant regional player he is today.
