When do you start to doubt the promoters, especially in a family owned business, where each person is holding a position and withdrawing salary from the company. Is there a threshold you keep?
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I am not sure about the answer to that question. But I am interested in knowing the ideal ratio between the top management’s pay and the worker’s pay.
At one point Infy, when Murthy was the CEO, had the lowest ratio.
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How much would you pay a manager for your own business? See a stock a business you own.
Slightly relevant question. The remuneration of directors of a public company (combined) should not exceed 10% of net profit. But I came across DCM Sugar’s AR and found the 3 directors pay to be 5 Crores each or 15 Cr+ combined. The net profit from consolidated P&L statement is 122 Crores. Are there any exceptions to this company act of ceiling limit (10% of net profit)?
Refer Page 36 of DCM 2017 AR
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I want to know ideal value or rough value of:
Ratio of the remuneration paid to Directors compared to median employee’s.
Is 40 or 50 times good one? or is very high?
Other rules about remuneration is well written here.
I just asked about director’s remuneration compared to avg salary of employees.
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Hi, this question seems not answered clearly, I had the same doubt.
I humbly request veterans like @hitesh2710 bhai, @Yogesh_s ji to help in this. .
Thank you.
granules has following figures for H1 of current FY vs last year
H1’19 PAT : 179
H1’20 PAT : 275
PAT increased by 53.63%
H1’19 Managerial Remuneration : 21.79
H1’20 Managerial Remuneration : 43.98
Managerial Remuneration increased by 102%
Is it within specified limits?
10% is on “net profit” according to company law not “net profit” as reported in audited statement or (to add more confusion) “net profit” as filed with IT. So as a retail investor it will be difficult to understand the rationale on which the remuneration is calculated (meaning the audited statement is the only thing that you can see).
Addressing the anomaly that you see, PBT is 366. Part of expense could be the management remuneration. So if you sum that up it could be 410. There are few expense exemptions that can be summed up to the PBT. So it (43.93) could be with 10% limit. I don’t see it way off.
The reason for YoY increase, (take it as my wild guess), they could have anticipated H2 divestment gains and could have refrained from cashing out as H1 19 remuneration.
Net - Net, if we see slightly above 10% of profit being paid as remuneration, it could well be because of definition of profit being different between auditors, MCA / company law and taxman.
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When they make losses too? Positive bottom line is a rarity at Balaji but remuneration is up to the ceiling.
For loss making companies (sec 197) an MD can draw 1.2 crores so together Mr & Mrs Kapoor can draw 2.4 Crores as remuneration. Now it is very apparent why Spouse, Sons, Daughters, Brothers and Relatives share managerial role, which essentially means limit under company law has workarounds.
Not pertinent to any companies that we talked about so far, but lets say you find any non compliance, the penalty for such instance is between 1 lakh (floor) and 5 lakhs (cap). As a retail investor, we can use these numbers to see whose interest the management weighs.
Another stand out case for me this yr has been NESCO. The promoters took almost 100% hike in an yr where it was obvious that some of the business is going to suffer.
Is this to be taken as a red-flag? Or is it a one-off to ignore?