Pramod Bhasin, president and CEO of Genpact, an Indian BPO company earlier owned by GE, earned an annual salary of over Rs 12 crore (Rs 120 million) in 2006.
Rahul Dhir, CEO of energy firm Cairn India, will get Rs 100 crore (Rs 1 billion) in stock options alone -- a third vested the day after the firm's successful IPO in December 2006.
Bhasin and Dhir are among the 100-odd million-dollar non-promoter CEOs in the country. Though the number is still small on a global scale, the list is growing rapidly thanks to an estimated 30-40 per cent rise in their salaries in the last few years.
India Inc says it all boils down to the fierce competition for talent. Surely most of these executives deserve every paisa they are paid, and more. Being a CEO requires skills that are in short supply. And it's a fact that the competition for talent is fierce.
But super rich CEOs are suddenly in the spotlight after the prime minister's recent advice to Indian companies to 'resist' paying large salaries to their top executives. While the PM's men have repeatedly said that he was only trying to tell industry captains to curb ostentatious spending, it was Montek Singh Ahluwalia who hit the bull's eye by saying that corporate salaries are a matter of great debate even in developed countries.
According to the 2006 Global Institutional Survey, executive compensation is considered one of the top three governance issues in the United States, the United Kingdom and Europe. In a Bloomberg poll in March, more than 80 per cent of Americans agreed most CEOs are paid 'too much.'
However, the point to note is that the governments or regulators in these countries did not waste time in advising companies on trimming pay cheques since they did not want to interfere with market forces.
They have rather pushed for more transparent disclosure requirements for all forms of executive compensation -- stock options, pension benefits, use of company assets such as airplanes and severance allowances, including golden handshake payments.
No wonder SEC chairman Christopher Cox has pushed ahead with the toughest set of pay disclosure rules in 15 years. The SEC's rules now require companies to organise executive compensation disclosure into three broad categories: compensation over the last three years; holdings of outstanding equity-related interests received as compensation that are the source of future gains; and retirement plans and other post-employment payments and benefits.
This is a far cry from the situation a few years back. Consider this: the world learnt about Jack Welch's retirement perks -- including Red Sox tickets, a Manhattan apartment for life, country club memberships and free use of a corporate jet -- not from any GE disclosure, but from his wife's divorce papers.
The reason for the new salary disclosure rules, Cox said, is that shareholders ought to know why a senior manager is getting such fancy sums. They are entitled to information on the specifics of the major perks.
Perhaps most important of all, they ought to know the reasoning that leads to the choices a company makes. In one of his speeches justifying the new disclosure rules, the SEC chairman said it's an open secret that today's compensation committee reports are simply a waste of trees and ink.
A majority of Indian companies are not far behind in the 'waste of trees and ink' when it comes to publishing their compensation strategy.
Here is one example from an Indian company's annual report: "Our compensation strategy is to ensure that the senior executives of the company are compensated effectively in a manner consistent with our stated compensation strategy, competitive practices and the requirements of appropriate regulatory bodies." Notwithstanding the length of the sentence, did anyone actually learn anything about what the company's compensation strategy might be?
As Cox said, shareholders and their representatives need intelligible disclosures that can be understood by a lay reader without the benefit of specialised expertise, and without an advanced degree.
The rules need to clarify executive pay and demystify any financial dealings between executives and the companies they work for.
This will give companies an opportunity to explain their compensation policies and to share with investors how they arrived at the particular levels and forms of compensation for their highest paid executives.
The result of the new salary disclosure rules has been stupendous. About 40 per cent of the chief executive's pay package in the US is now linked to hitting specific corporate targets.
India Inc would do well to listen to Cox's advice: after all, a company that is required to undress in public will pay more attention to its figures.