Monday, August 09, 2004

CEO salaries outstrip growth of profits

From the pages of The Hindu Business Line dated August 9, 2002
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While the compensation for the CEOs has increased, this has not resulted in a positive change in the performance from the point of view of all other stakeholders including equity shareholders.

IT was always felt but could hardly be proved. Finally, a study conducted by two faculty members of XLRI (Xavier Labour Relations Institute) has concluded that CEOs of India Inc. have increased their pay packets at a faster pace than the profitability of their corporation.

The trend started in 1995, but failed to take other stakeholders along with it. It was found that minority shareholders were not rewarded adequately on their investments, employees were made to remain satisfied with low wages, and donations to social causes were almost neglected.
This might temporarily put to rest some of the debates over the CEOs' pay package. The deprived lot always shouted that the top bosses were going away with thicker salaries than what they deserve.
Prof Ram Kumar Kakani and Pranabesh Ray of XLRI have concluded in their study that the increased remunerations of the corporate bosses have not translated into similar increments in company's profitability.
The study — CEO pay packages and firm performance: The ballooning issue — is based on the published corporate performance data of 16 large manufacturing firms and is spread over two decades. Full Story
Read the Full Paper at:
CEO remuneration — I : The burning issue, Business Line, August 13, 2002

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