Saturday, June 07, 2008

Can the Indian CEOs and Senior Management offer to reduce their Salary and Allowances ?

Dear Readers,

True this is indeed a tough time and companies are finding it extremely difficult to optimize the costs. While the single digit hikes have become norm of the day for the engineering staff, can the senior management be left far behind.

Is it not the time that the senior management voluntarily offered to surrender part of their earnings in these 'difficult times' ?

Why not the India Inc - It software / product companies take a cue and go ahead with these kind of austerity measures to enhance the bottom line.

Let us hope good sense will prevail and most of the companies follow suit. Please go through an interesting article on the subject which should be an eye opener for many of us who are contemplating similar steps.

Best Regards,

Founder HRinIndia
Indias biggest HR Network
Bangalore India
India’s largest software exporter Tata Consultancy Services (TCS) decreased the fixed component of the salary for its MD & CEO S Ramadorai in 2007-08.

The move, which comes in the backdrop of an ongoing slowdown, reflects a curious contrast in India’s IT sector, while employees get bigger pay hikes compared to peers in other sectors, their chiefs live more modestly and take less extravagant pay hikes.

This contrasts with several other sectors, where employees get lower pay hikes but their top brass live in greater opulence. Although Mr Ramadorai’s overall compensation went up, the fixed component of his salary came down from Rs 133 lakh in FY07 to Rs 129 lakh in FY08. The change represents a drop of about 3% as compared to hikes of around 8-10% it announced for its employees.

“TCS may have wanted to send out a signal about controlling costs. Core salary costs, which don’t include travel, visa and overseas expenses constitute about 20% of revenues for companies,” commented an HR consultant. The variable component, which earlier formed about 52% of Mr Ramadorai’s total remuneration, has gone up to 62% in FY08, according to the company’s latest annual report.

Three executive directors, S Mahalingam, N Chandrasekaran and Phiroz Vandrevala, who were promoted in September 2007, also have a high percentage of their salary as variable component. All three earned over 70% in variable pay with COO N Chandrasekaran earning the highest at Rs 108 lakh and Mr Vandrevala earning Rs 70 lakh.

“Business heads and CEOs typically have about 30-40% of the total gross compensation as the variable component. In this case, the variable component may have been higher because their performance may have been evaluated as ‘above target’ or higher than ‘on-target,” said R Suresh, managing director of HR firm Stanton Chase.

He said a comparison with Infosys Technologies on remuneration would be inaccurate, because CEO-level executives in Infosys were also shareholders of the company earning significant dividend income.

In FY08, TCS revenues grew 22.7% to Rs 22,861.4 crore and 21.5% growth in net income to Rs 5,019.1 crore. Its Q1 growth was the highest at 43%, followed by a growth of 36% in Q2 and a growth of 29% and 19% in the third and fourth quarters respectively. The growth was least in Q4 when the effect of the slowdown in the US economy was most visible.

Source ET

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