The Hindu Business Line : Directors' pay rises faster than staff's

THIS is sure to bring more than a smirk to your face. The pay of directors on board Corporate India is rising faster than what is paid to employees down the line in the past three years.

In their defence, you can certainly say that they earned it. Net profits have been rising faster than their remuneration.

This emerged out of an analysis of the financial performance of 300 companies that are part of the S&P CNX 500 index. Remuneration includes salaries, perquisites and sitting fees. The bulk of the pay packet would however be the commission paid to directors. Of course, this does not include value of stock options, which are granted over and above what is paid out by way of cash compensation.

An average large company (with employee costs of more than Rs 100 crore) in the sample had seen an increase in its wage bill from Rs 135 crore to about Rs 178 crore at an annual growth of 9 per cent in the past three years. During the same period, directors' remuneration rose from Rs 1.1 crore to Rs 1.9 crore at an annual growth of about 19 per cent.

In contrast, an average smaller company (with a wage bill of less than Rs 100 crore), reported a 21 per cent increase in employee costs to Rs 21 crore for 2003-04 while directors' remuneration rose at an annual rate of 29 per cent to 0.73 crore.

Directors' remuneration has risen rapidly in mid-cap companies such as Tata Sponge Iron, West Coast Paper, TN Petro Products, Vesuvius India and ITC Hotels. Larger companies that have reported faster rise in directors' remuneration include Wipro, MICO, Dr Reddy's Labs, IPCL and GE Shipping.

The number of directors earning Rs 1 crore plus is also swelling.

In 2003-04, 83 directors received remuneration in excess of Rs 1 crore.

Apart from the Ambanis and the Munjals, the list includes directors of smaller companies such as Mr Ashok Jaipuria of Cosmo Films, Mr R.S. Agrawal of Bayer ABS, Mr M.B. Parekh of Pidilite Industries, Mr Rajinder Gupta of Abhishek Industries and Ms N. Bhuvaneswari of Heritage Foods.

Are there instances of companies that have had lower growth in director's remuneration compared to employee costs in the past three years? Indeed, there are.

Prominent among them are some profit-making companies such as Tata Steel, Infosys Technologies, Mahindra & Mahindra, Shree Cement and Thomas Cook.

These were exceptions. Companies, which consistently reported lower growth in directors' remuneration, also reported poor profit growth.

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