Top corporate salaries reveal disparity in pay & non-compliance by Reliance

A compilation of data from Annual Reports of the top NIFTY50 companies reveals that Reliance Industries Ltd is the only private company in the list not making the mandatory disclosure in its Annual Report.

A press release by economists Reetika Khera and Meghna Yadav, who compared the reports, points out that since 2015, a Securities and Exchange Board of India (SEBI) rule requires that publicly traded companies disclose the remuneration to their top management vis-à-vis other employees.

The disclosures are mandated under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

But RIL has withheld the information in its Annual Reports since 2016-17 and states that the information is available at the company’s registered office and anyone interested in the information can obtain it from there.

The economists also point out that the Annual Reports reveal an enormous disparity between the remuneration paid to the top management personnel and the average remuneration (median salary) of permanent employees (Pay Ratio).

The top-paid executive of Hero Motocorp, Infosys, Tech Mahindra, Bajaj Auto and Hindalco Industries earned more than 500 times the median salary of their company’s permanent employees in FY’20, according to their analysis.

The highest paid CEO of Hero Motocorp, Mr Pawan Munjal, is paid ₹85 Cr annual remuneration, which is 750 times the median remuneration in his company.

“It will be interesting to see which of these companies laid off people during/after the lockdown citing financial hardship,” exclaimed the economists.

Highest and lowest: While Hero Motocorp reported the highest pay ratio of 1:752, the lowest pay ratio is at Maruti Suzuki, at 1:39.

Lack of diversity: There is one woman - Ms. Vibha Padalkar – in this list. There does not appear to be any Dalits or STs, though there is (at least) one Muslim.

Notes:

• Remuneration is generally from a table titled “Remuneration of Directors and Key Managerial Personnel”. Sometimes, it is also reported along with the pay ratio. It does not include stock options.
• In two cases (Ultratech Cement and Asian Paints) the amount reported in the two tables varied significantly.
• The BPCL report states that “Similarly, Section 197 of the Act shall not apply to a Government Company (p. 50).” PowerGrid Corporation of India, NTPC, ONGC, GAIL, Coal India, BPCL, Indian Oil Corporation and SBI are government owned companies in the NIFTY fifty.
• Reliance appears to be the only company in the list dodging compliance with Rule 5(1) since 2016-17; in fact, the only private NIFTY fifty company that does not report the pay ratio is RIL.

RIL Annual Report (p. 219) states: “Disclosures relating to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report. Having regard to the provisions of the second proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection on all working days, during business hours, at the Registered Office of the Company. Any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.”