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Regular-article-logo Friday, 04 July 2025

Delhi rants at 'vulgar' corporate salary

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OUR SPECIAL CORRESPONDENT Published 04.10.09, 12:00 AM

New Delhi, Oct. 4: The Centre has advised companies not to pay “vulgar” salaries to CEOs amid growing worldwide pressure to cap corporate compensations in the wake of the downturn.

Today’s remarks by Salman Khursheed, minister of state for corporate affairs, also coincide with a government austerity drive.

“I think when we are working on this (austerity), we can hardly say that we (will) shut our eyes to what salary the CEOs are going to take,” PTI quoted Khursheed as saying.

Khursheed said chief executives’ salaries should be decided by shareholders. “I don’t think anyone in India today, in politics or outside politics... has reached the level of liberalism where vulgarity is also a fundamental right,” he said.

“A minister should not be judging who deserves what salary. We are moving away from control to regulation. But it doesn’t mean that you are going to be completely free.”

The annual pay of at least one CEO works out to over Rs 50 crore — more than 12,500 times the per capita income in the country.

Khursheed said the subject of CEO salaries would be debated by a parliamentary standing committee that was scrutinising the provisions of the new companies bill, tabled in the Lok Sabha in August.

“Let’s get the opinion of the standing committee, then we will move forward,” the minister added,

In May 2007, Prime Minister Manmohan Singh had told companies of the need to stop paying excessive salaries to top executives.

“Resist excessive remuneration to promoters and senior executives and discourage conspicuous consumption. In a country with extreme poverty, industry needs to be moderate in the emolument levels it adopts,” Singh had said.

The immediate backdrop to Khursheed’s comments is the discussion in the G20 at Pittsburgh. The G20 declaration on September 24 set down six principles for payment of bonuses to CEOs that would have to be put in place by next March.

Under current Indian law, a company’s total payment to its directors and managing agent, secretaries and treasurers or manager in any financial year can’t exceed 11 per cent of the net profit.

The new law proposes to hand to shareholders the power to approve remuneration.

“But the shareholders are not supposed to decide things blind. Shareholders also must decide in a certain context after particular information is made available to them,” Khursheed said.

Abani Roy, the RSP MP who has been one of the prime movers behind the bill, said: “Given the Congress party’s current drive towards austerity, this (a salary cap) may actually happen.”

A top corporate affairs official, however, said the process to bring about changes was long and with time the issue could die out. “In good times people normally forget about austerity,” the official said.

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