Marans, Et Al: India’s Promoter-CEOs Are Overpaid Even By US Standards

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.