CEOs' Pay Skyrockets Past Limits on Stock Awards

IT services firms are increasingly seeking shareholder approval to lift their CEOs' reported pay beyond statutory remuneration caps, driven by stock awards accumulated over years. Companies like Mphasis and Persistent Systems are requesting authorization to exceed the 5% of net profit limit, primarily due to the realization of stock awards.

Mphasis is seeking shareholder consent to raise its CEO Nitin Rakesh's remuneration threshold from 5% to 7% of net profit, citing accumulated shares that may be encashed. Similarly, Persistent Systems raised its CEO Sandeep Kalra's remuneration from 5% to 21% due to share-based pay. For context, Rakesh's reported remuneration in a fiscal year was ₹104.8 crore (5.63% of net profit), while Kalra's was ₹388.6 crore (20.84% of net profits).

Accounting rules and stock unit recognition contribute to these figures, where shares vested over time are exercised and sold within a single year. Companies must adhere to SEBI's Esop regulations and the Companies Act's Schedule V. Investor concerns are rising, with some proxy advisory firms recommending rejection of such proposals due to aggressive pay quantum compared to industry peers.