On the face of it, the data should provide enough ammunition for the trade unions to go for a new round of strikes and agitations. The numbers coming in show that CEOs and other senior executives of companies have been enjoying huge increases in remuneration. The hikes have been close to 400 per cent in some cases.

Take the example of Reliance chief Mukesh Ambani, India’s highest-paid CEO. He chalked up a whopping Rs 11.62 crore in 2003-04. His increase in 2004-05 was nowhere near what some of the others have got ? a humble 87 per cent. But in absolute terms, that’s Rs 10.10 crore. So the elder Ambani is earning an extra Rs 3 lakh a day.

So what’s the increase at the other end of the spectrum? A study by Assocham says that staff cost in the second quarter of 2004-05 increased by 22 per cent. A Hewitt survey puts salary growth at 14 per cent. A Mercer Human Resource Consulting report puts increase in salaries in India at 7.3 per cent above inflation, the highest in the world. And a Dataquest-IDC analysis of the IT sector, where salaries have traditionally been better, pegs the increase at 18 per cent.

But the average workers and junior executives are not bringing out the bubbly because they see “CEO excesses” overshadow their own raises.

HR professionals point out, however, that the absolute figures tell only part of the story. The huge hikes at the top level are not because of salary increases. It is the commission element that makes all the difference. To go back to Mukesh Ambani, his salary is just Rs 64 lakh (Rs 20.64 crore came as commission; the rest was perks). As companies perform better, the commission element can only increase.

Commission is a percentage of sales and the government imposes a ceiling on this. For a large company, the amount payable could be huge. So it is up to the company (the remuneration committee and the shareholders) to decide how much to actually pay. But both these are normally rubber stamps, so the CEO actually writes his own pay cheque.

For professional executives, you can’t complain too much. They have to deliver, or they are out on their ear. The risk justifies the rewards. In family-owned concerns, however, one needs to be more circumspect.

Shareholders should realise that, when they feel the boss is overpaying himself, they should vote with their feet and get out of the company. A plunge in the share price hurts the promoter more than a fall in his salary.

So are the trade unions right in agitating against rising CEO salaries? No. The markets are a better arbiter than the dinosaurs of an earlier era.

WHERE ARE THE HIKES?

The increase in the remuneration of select executives in 2004-05 (%)

Malvinder Singh/Ranbaxy 377

N.S. Sekhsaria/Gujarat Ambuja 366

A.J. Agarwal/Mercator Lines 330

D. Bhattacharya/Hindalco 326

K.M. Sheth/GE Shipping 205

P.D. Narang/Dabur 158

Mukesh Ambani/Reliance 87

Anil Ambani*/Reliance 87

* Anil Ambani has subsequently left Reliance

Source: Business India