India Inc decries proposed cap on CEO pay

Source: PTI

Last updated on: September 07, 2010 19:58 IST

A parliamentary panel's suggestion that CEOs' salaries should be capped has not found favour with industry chambers and leaders, who said the matter should be left to corporates and their shareholders.

"The government should not interfere. . . as long as there is adequate disclosure of the compensation," Wipro Ltd executive director and chief financial officer Suresh Senapaty said.

However, Senapaty who is also on the accounting committee of the CII, did admit that there are some cases of "obnoxious compensation" in the industry and the debate on the issue "is always most welcome".

After scrutinising the Companies Bill, the Standing Committee of Parliament on Finance had recommended capping CEOs' salaries. Asking the Corporate Affairs Ministry to develop a "rational formula" for managerial remunerations, it said that an "overall outer ceiling

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on managerial remuneration may be prescribed."

Assocham Secretary General D S Rawat said putting a cap on company heads' remuneration may come in the way of attracting talent.

"We strongly believe that in today's global competitive environment, the market forces are the deciding factors.

Capping will be the denial to attract the best talent," he said.

However, shareholders must have a say in deciding the compensation of the senior management, he said.

"The overall limit of fixing of the remuneration of the CEOs is already defined in the Companies Act and it should remain with the shareholders of the company," said PHD Chamber senior vice president Salil Bhandari.

According to the present law, the total remuneration paid to managerial personnel cannot exceed 11 per cent of net profit.