The former chairman of SEBI said that the dispute is happening due to the opposition of the shareholders
New Delhi. Until recently, the shareholders used to approve the increase in the salary of the top executives of the companies without any dispute. But now the matter has completely changed. In recent years, shareholders in many companies have disputed salary increases. M. Damodaran, chairman of Excellence Enablers and former chairman of SEBI, says shareholders are now shying away from supporting salary hikes based on several parameters. The first question that arises in their mind is whether the increase in salary is justified. Especially when in a situation in which salary cuts, retrenchment and other similar measures have been taken.
What is Damodaram called?
Damodaran says that the proposal to increase the salaries of the CEOs of companies is either barely dying out, or they are not getting the necessary support from the shareholders, especially the listed institutional shareholders. However, in the context of developments related to some companies, the issue has been discussed in recent times.
They say that recently in a company, the proposed salary increase of CEO was reduced on the ground that the company did not perform well in that year. Therefore, the salary cannot be increased. It was also argued that there is a need to give better salary to senior people to show better performance in the coming years, but this too was rejected by the shareholders.
The root of the problem is lack of communication
According to Damodaran, the root of the problem in both the old and new cases is lack of communication. With regard to CEO salary, the support of those shareholders who have sufficient confidence cannot be taken forever. Even though the responsibilities remain on the shoulders of the CEO. He is entrusted with the task of providing leadership to the company. But it is unfair for their salary to be very different compared to the salaries of other people in the company.
With such recent experiences, companies are now operating in two ways. The first is the CEO’s appointment resolution and the second is the salary resolution. Meaning now both should have different resolution. This will enable the shareholders to support the resolution of the appointmet.
