Press Information Bureau

Government of India

Ministry of Corporate Affairs

25-August-2011 17:35 IST

Salaries of Chief Executives

The Minister of State in the Ministry of Corporate Affairs Shri R.P.N. Singh today informed the Lok Sabha that the Companies Act, 1956 has prescribed a ceiling on the remuneration of chief executive officers (CEOs) of companies .

The total managerial remuneration to be paid to a Board level CEO of a company having only one Whole Time Director or a Manager is 5% of the net profit of the company and the total remuneration to be paid to all the Board level Directors together of a company, having more than one Whole Time Director or Manager, is 10% of the net profit of the company under Section 198 of the Companies Act, 1956. In case of companies having inadequate profit or making losses the remuneration is determined in accordance with the directions under Schedule XIII of the Companies Act, 1956.

The companies may pay more than the prescribed ceiling to their CEOs who are holding Board level positions with the approval of the Central Government as per provisions of the Companies Act, 1956.

The Minister was replying to a written question whether the Companies Act, 1956 has prescribed any ceiling on the remuneration of chief executive officers (CEOs) of companies; the details of the upper limit of the remuneration of CEOs and whether some companies are paying more than the prescribed ceiling to its CEOs and the action taken against such companies?

*****

ST/-

Remuneration ceiling for CEOs limits board-level pay under company law, with central government able to permit exceedance. The Companies Act, 1956 prescribes a statutory ceiling on managerial remuneration for board-level chief executives calculated as a percentage of net profit; where companies have inadequate profits or losses, remuneration is determined in accordance with Schedule XIII, and any payment above the ceiling is permissible only with prior Central Government approval under the Act.