Compensation Comparison & Historical Perspective

 

Compensation Comparison & Historical Perspective

Let’s learn more about compensation comparison and historical perspective relating to it.

Compensation Comparison

• USA is a market leader in top managerial compensation
• CEO and top managerial salaries in India have climbed but are puny in comparison to the global standards
• Both globally and nationally, CEO pay has increased way ahead of sales and other employee wages
• Both globally and nationally, Corporate performance not kept pace with CEO pay increase

Historical Perspective: in India

• In 1980s, restrictions on managerial compensation resulted in complete erosion of earnings at senior and middle levels (Companies Act 1956)
• Resulted in Chief Executives looking for better options abroad
• In 1988 restrictions on directors‘ salaries were raised to INR 15,000/-pm under Section 269, Companies Act, 1956, Schedule XIII

• In 1993, revision of Schedule XIII by the Government. Director‘s Salary limit raised to INR 50,000/- pm plus commission equal to annual salary
• Perks could be drawn equal to annual salary or INR 4,50,000/- pa whichever was less
• Overall limit of INR 10,50,000/- pm including perquisites was kept
• 1990s was a tumultuous period for Executive compensation
• Salaries were low, stable and predictable
• Legal ceilings existed on remuneration (salary and commissions) of directors
• Ceilings designed keeping in mind government officials – Bureaucratic structure- relationship with performance of business was non-existent
• Post liberalization and globalization, the trend reversed
• Mega bucks for the chief executives from 1991 onwards
• Inflation
• Demand for competent, talented grew but supply did not match
• MNCs recruited high quality manpower or their global operations at comparatively lower rates
• Indian family owned companies had to match the remuneration offered by MNCs
• Complex compensation structure (allowances, benefits included) against high tax structure
• Wide differences industry – wise in salary levels due to demand and supply trends, profitability, growth rate etc
• 1980s was boom period for advertising
• Early 1990s – for financial services
• Late 1990s – petrochemical, IT, power, insurance
• 2000 – IT and telecom, biotechnology
• Revision of salaries for government officials in 1996 & PSU employees in 1997 had a spiraling effect
• The % increase in chief executive salaries was not the same as those of the junior level employees.

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