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Industry warning over regulation of CEOs' pay

October 05, 2009 18:47 IST

Corporate India on Monday warned the government that any regulation of CEOs' pay may lead to flight of talent and capital from the country and said salaries are best decided by the industry.

"Any new norms on compensation to India CEOs may set in motion a flight of talent and capital away from the country," industry chamber FICCI's president Harsh Pati Singhania said in a statement.

Joining the debate with Corporate Affairs Minister Salman Khurshid who said that the CEOs' remuneration should be regulated, heads of apex industry chambers said that they would like the issue to be settled by and within India Inc.

The Confederation of Indian Industry is working on a governance code for its members that would deal with remuneration of executives at board level and a level below.

A CII task force, under the chairmanship of former Cabinet Secretary Naresh Chandra is studying the key issues of corporate governance, including the compensation packages of senior management.

"CII has always believed that corporates have a social responsibility and always supported self regulation," its President Venu Srinivasan said.

Khurshid's remark triggered a debate whether pay packets of industry honchos, some of whom are paid as much as Rs 2 crore (Rs 20 million) a month, should be regulated.

Singhania said with government regulations already in place, any further regulation is 'in the first place Redundant'.

As per the present regulation, compensation of all directors cannot exceed 11 per cent of the total profits of a company. Further, the compensation of all directors, including the executive chairman and wholetime directors, cannot exceed 10 per cent of the company profit.

He said the country has already seen that brain drain from the nation as the best talent left the country. "India's past brain drain, IIT/IIM people are at the helm of global corporations. They are now willing to work in India as the compensation has improved."

Assocham said while it favoured the austerity measures, the market forces and the issue of attracting talent cannot be brushed aside.

Chamber President Sajjan Jindal said for India to become global economic power, it would be important for the employers to use the best talent.

"Essential ingredients for it (India to be economic power) would be employment of the best talent in the corporate world whose salary package has to match the prevailing best in other parts of the globe," he said.

PHD Chamber of Commerce and Industry president Satish Bagrodia said the pay packets have to be commensurate to the value addition by the CEO to the company he/she works for.

"The companies should have the flexibility to decide on the salaries they are comfortable paying," Bagrodia said.

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