CEO salary cap removed

Corporate affairs minister Salman Khurshid today said the new Companies Bill, 2009, has done away with the 11 per cent cap on the remuneration of chief executive officers and directors. A final view on the matter would be taken by the Parliamentary Standing Committee, which is vetting the provisions of the bill. At present, a company's total payment to its directors and managing agent, secretaries and treasurers or manager in any financial year can't exceed 11 per cent of the net profit.

"The proposal that has come before Parliament does not have any cap. The Parliamentary Committee will take a final view and would take a decision. But the prevailing atmosphere in the world, from the US all the way to India, is today inclined towards some restrictions. Now whether that is necessary to apply a legislation or is there some other way of achieving it is something that has to be considered," Khurshid said.

He said there have been suggestions that the shareholders should be given the power to approve CEO's remuneration. But, he added, the shareholders should have enough information and disclosures so that they can take a decision on the issue.

"As of now, the proposal is that shareholders will decide the pay. In which manner the shareholders will decide is something the legislation will provide," he said adding that the shareholder should have enough information and disclosures so that he can take an informed decision. Earlier this month, Khurshid's statement saying that India Inc should refrain from doling out vulgar salaries to chief executive's had created a huge uproar. "I think when we are working on this (austerity), we can hardly say that we (will) shut our eyes on what salary the CEOs are going to take," the corporate affairs minister had said when asked how the government intends to control salaries of CEOs which at times appear vulgar.

Later, Prime Minister Manmohan Singh had put to rest the controversy by saying, "Our government as such has not taken a view on this. CEO salaries are best determined by the boards of the respective companies."