Marans, Et Al: India’s Promoter-CEOs Are Overpaid Even By US Standards
There is little doubt that India’s
promoter-CEOs are overpaid even by US standards.
It is high time shareholders started shouting a bit about this self-serving munificence of some promoter-CEOs.
Are India’s top CEOs overpaid? A look
at what the top 10 CEOs get paid, many of them promoter-CEOs who also receive
hefty dividends in addition to salaries, suggests that at least some of them
may be. Six of the top 10 earners are promoter-CEOs.
Mint newspaper today published a list of
India’ top 10 CEOs by incomes earned from salaries and commissions, and heading
the list are the Marans, Kalanithi and Kavery, with Rs 71.47 crore each.
Next comes AM Naik of Larsen &
Toubro, with Rs 66.14 crore, Pawan Munjal and Sunil Munjal of Hero Motocorp
with Rs 57.4 crore and Rs 54.37 crore respectively, followed by Vishal Sikka of
Infosys with Rs 48.73 crore, and so on. We could go on with the list, but
looking closely at just these top earners will be enough to demonstrate the
point that our promoter-CEOs are overpaid.
Let’s start with Kalanidhi Maran,
whose brother Dayanidhi Maran, during his stint as Union Telecom Minister, was alleged
to have illegally given himself several hundred telephone lines from BSNL when
he could have afforded to pay the normal price for these services.
Maran’s Rs 71.47 crore salary (including
commissions) works out to US $10.73 million at current exchange rates (Rs 66.5
per US$).
You could say that this salary is
nowhere near what some of the top CEOs in the US get paid, where Discovery
Communications CEO got $156 million in 2015, Michael Fries of Liberty Global $112
million and Satya Nadella $84 million.
But the median US CEO pay was far
less, at $17.6 million, according to a list of the top 200 CEOs’ pay for 2015
published by The New York Times.
One can claim that even the highest
paid Indian CEO’s pay, Kalanithi Maran’s, falls short of US CEOs’ median pay,
but this would be wrong. Reason: the costs of a CEO living in the US and those
of one living in Chennai or even Mumbai are far lower.
The World Bank’s purchasing power
parity-based calculator puts India’s real GDP (around $2 trillion now) four
times higher at $8 trillion when recalculated on a purchasing power parity
basis. PPP-based estimates take the rupee cost of similar things when compared
to the US.
If we take four as the multiplier to
arrive at the real salaries of Indian CEOs to make them comparable with global
CEOs’ pay, the comparable Kalanithi Maran pay in US dollar terms would not be $10.73
million, but nearly $43 million – more than twice the median US CEO pay.
The same would be the case with his
spouse, Kavery Maran, who got the same Rs 71.4 crore pay. She too would beat
the US median CEO pay by more than double, when adjusted for purchasing power
parities.
Even Nos 3, 4, 5, 6 and 7 on the
highest paid list, AM Naik, Pawan and Sunil Munjal, Vishal Sikka of Infosys and
Desh Bandhu Gupta of Lupin respectively, the last with earnings of Rs 44.77
crore, would beat the US median rate. It is only when we reach No 8, Sunil Mittal
of Bharti Airtel, with Rs 27.85 crore salary plus commissions, that we roughly
hit the US median.
And let’s not forget, many of the
best-paid CEOs are also promoters, which means they will be hauling the stuff
in sackfuls through dividends.
The Maran family, which owns 75
percent of Sun TV, paid out over Rs 443 crore in dividends in 2014-15 – and three-quarters
accrued to the family. That’s over Rs 330 crore.
Why pay Kalanithi and spouse Rs 71
crore each, when they are also getting an overwhelming share of the dividend
loot?
There is little doubt that India’s promoter-CEOs are overpaid even by US standards. It is high time shareholders started shouting a bit about this self-serving munificence of some promoter-CEOs.