There is a noticeable increase in the number of executives at ITC, a well-known Indian conglomerate with a broad variety of commercial activities, who earn more than Rs 1 crore annually. According to the company’s most recent annual report, 68 more executives joined the crorepati club in fiscal year 2024 (FY24), bringing the total to 350. This was a significant turning point. This is an increase of 24.11% over FY23. This article looks at how this shift might affect ITC’s operations, workers, and the business environment as a whole.
Credits: Hindustan Times
Expansion and Operational Scale
The increase in high-earning executives highlights how broad ITC’s business is. ITC works in a number of industries, including paperboards, packaging, agribusiness, hotels, cigarettes, and fast-moving consumer goods (FMCG). Because of its diverse portfolio, the company needs a strong leadership team to oversee its extensive and intricate operations. The rise in CEO compensation may be interpreted as an indication of ITC’s efforts to draw and hold on to the best personnel required to propel its growth into new product categories.
Performance and Sustainability Goals
The compensation policy of ITC is characterized as “market-led,” considering the competitive landscape of every business category. The policy places a strong emphasis on performance in relation to the business’s sustainability objectives. This strategy links executive pay to sustainable business practices and long-term value creation. ITC hopes to promote a culture of accountability and creativity by linking compensation to sustainability performance. This will incentivize executives to support the company’s wider environmental and social goals.
Impact on Employee Morale and Retention
There could be conflicting effects on staff morale from the increase in high-earning executives. On the one hand, it shows that the business is dedicated to recognizing quality, which may inspire staff to pursue excellence. Conversely, the notable discrepancy in compensation levels could give rise to worries regarding income inequality within the company. ITC must make sure that its compensation policies are transparent and that the justification for executive pay is clearly communicated in order to allay these worries.
Leadership and Incentives
Sanjiv Puri, the chairman and managing director of ITC, received a 50% raise in gross compensation in FY24, totaling Rs 28.62 crore. Key management personnel (KMP) compensation increased by 59% as well, with the temporary addition of executive directors and long-term incentives to blame. Based on recommendations from the Nomination and Compensation Committee, the board sets performance bonuses for the chairman and other executive directors, with a cap of 300% and 200% of their basic/consolidated salary, respectively.
Such substantial increases in executive pay highlight the importance of leadership in driving ITC’s strategic objectives. Performance bonuses incentivize executives to achieve short-term and long-term goals, aligning their interests with those of the shareholders.
Broader Business Environment
ITC’s move to significantly increase executive remuneration may set a precedent for other companies in the industry. As a major player in the Indian market, ITC’s practices often influence broader business trends. Competitors may feel pressure to revise their compensation structures to attract and retain top talent, potentially leading to a ripple effect across various sectors.
Financial Performance and Shareholder Value
Despite the substantial increase in executive pay, ITC achieved consolidated revenue of Rs 76,840.49 crore in FY24, reflecting a marginal increase of 0.42%. However, the company’s net profit grew by 6.6% to Rs 20,458.78 crore. These figures indicate that ITC managed to improve profitability while maintaining stable revenue growth. For shareholders, the focus will be on whether the increased executive pay translates into sustained financial performance and long-term value creation.
Conclusion
ITC’s move to increase the proportion of high-earning executives demonstrates its dedication to drawing in and keeping elite personnel to manage its intricate and varied business operations. This move highlights the company’s expansion and growth, but it also raises issues with employee morale and income inequality. ITC’s future-focused approach is shown in the emphasis on performance and sustainability in calculating rewards. The impact of ITC’s executive compensation policy will be extensively monitored as the company develops by shareholders, employees, and industry observers.
