This Sunday morning Biocon’s Kiran Mazumdar-Shaw’s opinion on CEO Salaries and Austerity Measures in DNA caught my eye…just a few days ago,Minister,Salman Khurshid had commented that Corporate CEOs should display austerity…Shaw comments that Government has no business dictating terms to Corporates on this matter as it is decided by shareholders..therefore the controversy and debate is uncalled for !
She must surely realise the influence that Promoters exert over the Board of Directors and the Remuneration Committee….Minority Shareholders simply don’t matter…so any remuneration agenda is easily passed by majority,read Promoter,Shareholders.
Shareholders,Investors and the Public in General often feel angry,cheated,frustrated when they see the obscene levels of salaries that the Heads of quite a few Listed Companies get….particularly when the company makes a loss or even a low profit and never even pays a dividend……. and yet the CMD/CEO Salary levels are into space…Shareholders are not rewarded but Promoters managements are !
Take Oswal Chemicals & Fertilizers for example…Gautam,this should answer your query too.
For FY 09 the company has shown a net profit of Rs 23.86 crs…and has c/f a loss of Rs 305 crs to this year….Networth is Rs 2170 crs with Equity (FV Rs10) at Rs 257 crs (Promoters hold 59.55%) and Reserves at Rs 1913 crs …gives a book value of over Rs 84….no debt…but huge assets of Rs 1309 crs are lying in Advances with the auditors, T R Chadha & Co, qualifying accounts for non-confirmation and non-reconciliation of certain debit and credit balances…With such a high quantum involved ,it would have been proper for the auditors to have specified the Aggregate Amount that they were unable to confirm or reconcile.
The Company has sold of it’s Fertilizer business and is now largely deploying funds in Investments and Real Estate…The Company yet has to change it’s name to reflect the exit of old business and entry into the new business verticals…It should have done this by now
In FY 08 the topline was Rs 629 crs and it earned a net of Rs 249.82 crs as it sold flats and plots aggregating Rs 489 crs….but in FY 09 the topline dropped to just Rs 139 crs and the net dropped to just Rs 23.86 crs as real estate business was affected….The Income came largely from Interest of Rs 81 crs from funds parked in Inter Corporate Deposits and Rs 17 crs from FDRs….another Rs 6 crs were from Trading in Shares/MFs and Bonds….Investment Segment shows a deployment of Rs 741 crs…so it’s 14% return….But the Real Estate Segment shows deployment of Rs 895 crs,while only Rs 25 crs is the revenue through sale of Plots….There is an adhoc provison of Rs 25 crs for Loss in the Real Estate Business and a w/o of Rs 40 crs for Balances. There has been no dividend declarations as there yet is c/f loss