Unwind the secrets of co by analysing managerial salaries

Managerial remuneration is an important aspect which most of us fail to analyse while investing in a company. Today, let’s decode what insights you can find in this section!

Today, let me ask you a question.

What all things do you check before investing in a stock?

Your answer would be nothing different from what has ideally been preached to you for so long. And that would be…checking multiple ratios, reading annual reports, how much profits the company is making, what is the CAGR return the stock is generating, and so on.

While analysing all of these factors, did you ever wonder how much is the salary of the CEO or the company's board of directors?

If not, you will be surprised to know that managerial remuneration is a crucial parameter of corporate governance that most of us fail to check.

What is Managerial Remuneration?

Well, you might wonder, what do we investors have to do with how much salary the company is offering to its higher officials, right?

Let’s simplify. From where does the company offer salaries to its employees? Obviously from the profits the company is making!

Now, if the salaries of higher officials of the company are high, then they are taking a bigger bite of the pie, and a smaller piece is left for investors.

Remuneration of Startup Founders

Here is the remuneration earned by some famous startup founders:

According to Business Standard, the Founder of Nykaa, Falguni Nayar, received the highest remuneration of Rs 10.8 crore in FY21. This indicates a fivefold increase in revenue as her remuneration was Rs 2.7 crore in FY19.

Vijay Shekhar Sharma, founder and CEO of Paytm, drew a compensation of Rs 3.4 crore in the year ending March 2021. As he was reappointed in July 2021, his remuneration was increased to Rs 4 crore annually.

What’s Next?

Managerial remuneration is a lesser-known yet vital factor to check while analysing a stock for longterm investments. So, the next time you read an annual report, don’t forget to check the corporate governance section.