India Inc thinks its CEOs, senior execs are overpaid

This would be good news for corporate democracy. A survey has found that as much as 70 percent of Indian business leaders feel that shareholders should have greater involvement in establishing a remuneration policy for senior executives at large public companies. This apart, an overwhelming 78 percent believe senior executives are paid too much.

The global survey of 2,800 businesses in 40 countries was conducted by Experian in May and June 2012 as part of the Grant Thornton International Business Report, a quarterly global business survey of 3,000 public and private businesses. Around 100 businesses participated in the Indian leg of the survey. The figure of 70 percent for India is higher than the global average of 67 percent.

[caption id=“attachment_418114” align=“alignleft” width=“380”]  An overwhelming 78 percent believe senior executives are paid too much[/caption]

More than three-quarters (71 percent) say that public companies should disclose the remuneration policy and individual remuneration of executive and non-executive directors and 86 percent believe that the roles of CEO and Chairman of the Board should be held by different people to ensure greater oversight.

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Says Vinamra Shastri, Partner & Practice Leader, Business Advisory Services, at Grant Thornton India: “The results clearly illustrate the growing caution that shareholders are demonstrating when it comes to how their money is being spent, and by whom. In light of executive mismanagement of finances, and negligence of shareholder interest, there is an inevitable and often outspoken demand for greater transparency.”

This is clearly reflected by a “resounding 89 percent” vote saying that “executive remuneration at public companies should be closely linked to performance targets.”

About Indian businesses opining that executives are paid too much, Shastri says one should also note that the proportion of family-owned and family-managed businesses is larger in India. Hence the opinion of the value that professionals bring, and the rewards they subsequently get, may be lower in some cases."

Shastri added, “What is clear from the survey is that senior executives have to clearly demonstrate performance, and tangible, measurable value, to the ones who matter most - the shareholders, and added: “It would be an arduous challenge to predict how these aspirations would be adopted into practice.”

The responses from Indian businesses on the survey questions were as follows:

• In your opinion, are senior executives at large public companies paid too much? 78 percent said yes.

• Should public companies disclose the remuneration policy and individual remuneration of executive and non-executive directors?71 percent said yes

• Should shareholders have greater involvement in establishing remuneration policy for senior executives at large public companies? 70 percent said yes

• Should the roles of CEO and Chairman of the Board be held by different people to ensure greater oversight? An overwhelming 86 percent said yes.

• In your opinion, should executive remuneration at public companies be closely linked to performance targets? Again an very big 89 percent yes.