TCS TRIMS FIXED PART OF MD, CEOs PAY

N Shivapriya, Mumbai
The Economic Times

India’s largest software exporter Tata Consultancy Services (TCS) decreased the fixed component of the salary for its MD & CEO S Ramadorai in 2007-08.

The move, which comes in the backdrop of an ongoing slowdown, reflects a curious contrast in India’s IT sector, while employees get bigger pay hikes compared to peers in other sectors, their chiefs live more modestly and take less extravagant pay hikes.

This contrasts with several other sectors, where employees get lower pay hikes but their top brass live in greater opulence. Although Ramadorai’s overall compensation went up, the fixed component of his salary came down from Rs 133 lakh in FY07 to Rs 129 lakh in FY08. The change represents a drop of about 3 percent as compared to hikes of around 8-10 percent it announced for its employees.

“TCS may have wanted to send out a signal about controlling costs. Core salary costs, which don’t include travel, visa and overseas expenses constitute about 20 percent of revenues for companies,” commented an HR consultant. The variable component, which earlier formed about 52 percent of Ramadorai’s total remuneration, has gone up to 62 percent in FY08, according to the company’s latest annual report.

Three executive directors, S Mahalingam, N Chandrasekaran and Phiroz Vandrevala, who were promoted in September 2007, also have a high percentage of their salary as variable component. All three earned over 70 percent in variable pay with COO N Chandrasekaran earning the highest at Rs 108 lakh and Vandrevala earning Rs 70 lakh.

“Business heads and CEOs typically have about 30-40 percent of the total gross compensation as the variable component. In this case, the variable component may have been higher because their performance may have been evaluated as ‘above target’ or higher than ‘on-target,” said R Suresh, managing director of HR firm Stanton Chase.

He said a comparison with Infosys Technologies on remuneration would be inaccurate, because CEO-level executives in Infosys were also shareholders of the company earning significant dividend income.