Top managers rewarded

Is it time to Occupy Dalal Street? Top managerial remuneration at several Indian companies has reached stratospheric levels in a decade while the take-home of the blue-collared is taking a beating, an ET study shows, turning the spotlight on Prime Minister Manmohan Singh ’s advice to India Inc top guns to resist excessive compensation.While remuneration for directors as a proportion of profit before depreciation, interest and tax, or PBDIT, rose from 0.4% to 0.6% between 2001 and 2011, staff bill as a portion of PBDIT decreased from 34% to 28%, according to a study by the ET Intelligence Group.The study analysed the growth of sales, PBDIT, staff costs and directors’ salaries of 236 companies of the BSE 500 Index. Staff cost for paints company Kansai Nerolac grew seven times over the past decade while that of its directors surged 23 times, regulatory filings show.For textiles company Century Enka, it was 10 times for workers and 39 times for directors, while for Orient Paper & Ind staff costs rose 23 times against 91 times for directors. There is no law limiting the remuneration for top executives, and discussions about ‘vulgar’ pay in the past have been buried due to stiff opposition from corporates that say talent must be rewarded. The reasons for the jump could be varied as statistics don’t capture all factors.Statistics don’t take into account factors such as rising efficiency where far lesser workers are needed in a plant than a decade ago. But in the financial sector, at least in commercial banks, the Reserve Bank of India keeps a close watch on top management pay.In 2007, Singh had told captains of industry that the management should “resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption”. Data showed that on an absolute basis, sales have grown 4.8 times and PBDIT 4.6 times. Against this, staff costs have grown 3.7 times.India Inc rewarded its top management handsomely during this period. Beating the growth in sales and PBDIT, directors’ remuneration increased 7.4 times over the decade, double the growth logged by the total staff bill. It is pertinent to note that inflation rose significantly during this period.Given the base year of 1993-94, the annual wholesale price index for all commodities doubled between 2001 and 2010. The WPI increased from 155.7 in the fiscal year 2001 to 242.9 in FY10. This increase would in turn have an impact on living standards.The study reveals that in the case of sectors such as construction, oil and gas, auto and auto ancillaries, diamond and jewellery industry, and entertainment and media, wage growth has not kept pace with growth in sales and PBDIT.For instance, while the cumulative PBDIT in case of four construction companies rose 4.5 times, the cumulative staff cost only doubled. However, directors’ remunerations rose six folds.In the case of auto major Maruti Suzuki, its total wage bill grew 3.5 times, but this increase looks miniscule when compared with the company’s PBDIT, which increased by 32 times in the last 10 years. This data may only reflect a part of the wage story since wages paid to blue-collared employees is not captured separately.