Mukesh Ambani has brought down his own salary for 2008-09 to Rs 15 crore from Rs 44.2 crore the year before, following the RIL compensation committee’s decision to cap the chairman’s salary at Rs 15 crore.
One can crib that Rs 15 crore is not particularly austere. But the elder Ambani sends out the right signal that, at a time of widespread misery following slowdown, drought, epidemic and now floods, the richest of the land will, if not quite share the sorrow, shed a part of their pleasure. Earlier, Anil Ambani, too, had forgone his salary and commissions for 2008-09.
These symbols matter when it comes to holding society together. In terms of pure cash in hand, when promoter CEOs cut their salaries, they don’t really lose much. On the foregone salary of Rs 29.2 crore, Mr Ambani would have paid a tax of 33% or Rs 9.64 crore, net of which the salary cut would be Rs 18.56 crore.
For promoters who hold a large proportion of their company’s equity, it makes far more sense to take profits out in the form of dividends, which are tax-free in the hands of the recipient. The promoters of RIL own 46.3% of the company’s equity.
If, instead of incurring an expenditure of Rs 29.2 crore by way of the promoter chairman’s salary, RIL were to choose to pay that entire amount as dividend, after paying a 15% dividend distribution tax, Rs 11.5 crore would still accrue to the promoter, reducing the post-tax salary foregone to Rs 7.5 crore.
But this is to quibble. RIL promoters received dividends worth Rs 873 crore last fiscal. A few crore of salary is neither here nor there.
Source economictimes.indiatimes.com
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