Mukesh's decision to take pay cut commendable: Govt

The government today lauded RIL chief Mukesh Ambani's decision to take a pay cut and said the industrialist had shown a “remarkable sensibility” towards the prevailing scenario with this voluntary step.

“What Mukesh Ambani has done is laudable ...it's a good decision," said Corporate Affairs Minister Salman Khurshid, who recently sparked a debate on executive compensation by advising the industry to shun vulgar CEO salaries.

Yesterday, the country's top corporate house, Reliance Industries, announced that its Chairman and Managing Director Mukesh Ambani would take a pay cut and it was capping the top compensation of its top executives.

“This is part of a larger debate among corporates themselves and the government would be happy to engage in the debate,” Khurshid told reporters here.

“It is about corporate governance, which is not about remuneration alone. It's about internal auditors, about shareholders, about disclosures and accountability. But taking a cut in remuneration is the most visible issue as far as the public is concerned. Whatever voluntarily a person like Mukesh Ambani has done shows remarkable sensibility to the prevailing thought process in the entire country,” the minister said.

RIL has said that its CMD would draw a salary of Rs 15 crore for 2008-09, down nearly two-third from over Rs 44 crore last year, and this reflected “his desire to set a personal example of moderation in executive compensation”.

Khurshid further said that the percentage of the cut was not important, “although they are indicative of intention”.

“I think the principle is important. But Mukesh Ambani has certainly set an example but everybody is placed differently. I don't think you can have a single rigid rule. It indicates that the corporates are involved in the same sensitivity and priority as the rest of the country.”

After Khurshid sought industry’s restraint from “vulgar” salaries, Planning Commission Deputy Chairman Montek Singh Ahluwalia had also said that there should be no “indecent” compensation for CEOs, although industry associations have maintained that salaries are best decided by company Boards and shareholders.

From now on, RIL has also decided to adopt the capped structure method of deciding executive compensation in RIL, instead of pegging it as a percentage of net profit.

Consequently, Mukesh's salary is lower than not only many other industrialists in India, but also CEOs of RIL's global peers like ExxonMobil and Shell.

Even Anil Ambani recently announced that he would not take any salary or commission from any of his five listed group companies for 2008-09.