India Inc’s senior management sees a salary decline in FY20

MUMBAI: Covid-19 related disruptions and resulting impact on businesses adversely impacted senior management remuneration of India's largest companies. Data showed that India’s biggest firms have slashed salaries for their top executives in FY20 amid cut in expenses, lower profitability and cost rationalisation across sectors. In some cases, the drop was as high as 44%.

According to a Mint analysis, median salaries of top bosses' salary of 28 companies in Nifty was down 5.56% in FY20 against a rise of 4.81% previous year based on data compiled by primeinfobase.com, part of Prime Database group. The analysis considered single highest remuneration paid in the year by the company, irrespective of designations. The data also adds stock options to the total compensation figure wherever it is available.

The cut in salaries comes at a time when aggregate net profit of these set of companies grew marginally at 0.98% year-on-year in FY20 compared to growth of 21.51% in year ago period. Overall employee costs for these companies increased 11.18% (YoY) in year ending March against an increase of 15.88% in previous fiscal.

Companies have reduced fixed costs, especially high staff expenses as profitability and March quarter sales took a hit. During the period, companies used a combination of direct retrenchment and pay cuts along with a hiring freeze to control costs.

The data showed top earners in companies such as JSW Steel, Larsen and Toubro, Cipla, Tata Consultancy Services, Titan Company, Kotak Mahindra Bank took pay cuts in FY20. The highest paid executive in the last financial year was HDFC Bank Managing Director Aditya Puri at ₹180.49 crore. Puri, set to retire in October, earned an additional ₹161.56 crore by exercising stock options during the year. He had earned ₹55.87 crore as remuneration in FY19.

Besides Puri, Rajeev Jain (MD, Bajaj Finance), Salil Parekh (MD, Infosys), CP Gurnani (MD, Tech Mahindra) and Sanjiv Bajaj (Chairperson, MD, Bajaj Finserv) saw an increase of 28%-44% in their remuneration. From the available data, Larsen and Toubro Managing Director SN Subrahmanyan and JSW Steel Chairman Sajjan Jindal saw highest pay cut of 43%-44% in the year. Jindal received ₹40.03 crore from the company.

Among the Nifty companies (from data available so far), Pawan Munjal (CMD and CEO, Hero Motocorp) received ₹85.59 crore, Hari Mohan Bangur (MD, Shree Cement) was paid ₹41.76 crore, and Rajiv Bajaj (MD, Bajaj Auto) got ₹39.86 crore in FY20.

According to the 2020 Workforce and Increment Trends survey by Deloitte Touche Tohmatsu India released in August, two important factors -- the timing of the increment cycle and the expected impact of covid-19 on FY21 revenue affected increment decisions in 2020.

“The average increment in companies with revenue of above ₹10,000 crore has been lower than relatively smaller companies (in terms of revenue). Increments have been lower for companies following a post-June increment cycle. Larger organisations have seen a bigger drop in increments,” the survey said.