Executive Summary
The discussion around pay compensation being provided to the top executives of various companies in India has gained significant attention since the advent of economic liberalization and the subsequent development of Indian market as an international business hub. Salaries for managerial talent and specially in leadership positions has grown significantly since then and has seen a multi-fold raise in relation to the salaries for non-managerial positions.
From an economic and managerial costing perspective these high salaries are of significant concern as these costs caused by inflated salaries paid by the promoters to themselves in a promoter led company reduce the profitability of the company and also reduce the potential …show more content…
The per capita consumption of steel is currently 59.2 kilograms and is expected to increase more. Growth of infrastructure, increase in urban population and emergence of rural market will help in the growth of steel industry in India. The compounded annual growth rate is 7.9 percent over the 2009-14 period. During 2013-14 the production of finished steel was 87.67 million tonnes. The total employment in this industry is over 2 million which includes direct as well as indirect labour.
About JSPL
Founded in the year 1952, JSPL is an Indian multi-national company having interests in steel and power production and is a part of the diversified Jindal Group conglomerate. It is the third largest steel producer in India in terms of tonnage. It is a public listed company with promoters holding majority shareholding. A brief about JSPL for each of the financial years under consideration is mentioned below.
JSPL during Financial Year 2010-11
The financial year 2010-11 was a challenging year for Jindal Steel and Power Ltd. in terms of macroeconomic scenario. Yet JSPL emerged successfully through the year with a series of accomplishments. It enhanced its production capacities and started operations of wire rod mill at its Jharkhand plant. It expanded its international operations with commencement of production at its subsidiary company in Oman.[Source …show more content…
2010-11 the total remuneration paid to the Whole-time Directors stood at INR 83.92 crores whereas the remuneration paid to the Vice Chairman – MD stood at a staggering INR 67.20 crores. This figure is 400 percent of what was paid to the all other Directors cumulatively. Also the compensation paid to the Whole-time Directors was 2.21 percent of net profits of the company.
Similar trends were followed in subsequent years with the compensation to the Whole-time Directors amounting to INR 89.72 crores and accounting for 2.24 percent of net profits of the company for F.Y. 2011-12.
For F.Y. 2012-13 the compensation declined with the decline of the profit and a not-so-impressive growth in the top line but still it remained comparable withthe previous years and was rather 2.76 percent of the net profits of the company.
For the financial year 2013-14 it can be seen that although the net profit and operating profit are at the lowest out of all the four financial years under consideration, yet the compensation being paid to the Whole-time Directors is highest and stands at 3.45 percent. This clearly shows that compensation evaluation standards were not being properly tuned to factor in the poor performance of the