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India's Third Giant Leap
This Could be One of the Biggest Opportunities for Investors
- Home
- Todays Market
- Indian Stock Market News December 28, 2012
Should CEO's salary be disclosed? Fri, 28 Dec Pre-Open
Chief executive officers (CEOs) get paid lots of money for being the top employees in the company. This is because like athletes and actors, CEOs provide a level of talent that is required to produce the desired product - in this case, a strongly performing company. The skills and responsibilities that come with the job of CEO are extreme and the number of people who can fill this role is limited. That is why the market has determined that people with these skills are worth a lot of money to their companies.
In India also, there is a growing perception that the salary of promoters and CEOs is getting too high. For example - Naveen Jindal of Jindal Steel and Power (JSPL) has an annual pay package of Rs 734 m which is around 25 times the pay of the next highest-paid director.
Looking at the growing negative perception regarding CEOs pay issue, the government of India has urged companies to report salaries that promoters and chiefs get, plus the median salary of their employees. The government has also maintained a cap on remuneration of top management as per which not more than 5% of the net profit can be given to one single director of a company.
The point here is just this: the fact that someone is highly paid isn't automatically unfair. Sometimes it is unfair, and sometimes it isn't. We need to look carefully, on a case-by-case basis, at what that individual contributes to the business they manage, and what that firm contributes to society. But disclosure of salaries of top management must be made, so that the investors can make an informed decision about whether they are getting their money's worth from high paid CEOs.
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