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?

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0 responses to “Whether the Companies Act, 1956 has prescribed any ceiling on the remuneration of chief executive officers (CEOs) of companies?”

  1. Ritesh Tiwari says:

    Thank your sir, it is very good information for me

  2. rahul says:

    thanx for this very good article sir . i have a query:
    whether the criteria mentioned in the article of salary of the CEO is applicable to all the CEO’s including those of the multinational companies , who may not be a Board level CEO of a company having only one Whole Time Director or a Manager. In such an event what are the provisions for the salary? whether the salary as stated is CTC or the gross salary including or excluding the perks? and what is the max limit? if the provisions are not followed what are the action contemplated in the companies Act?

  3. Narendra Sharma says:

    The aforesaid is applicable to the CEO, who is a DIRECTOR on the Board.

    The Companies Act, 1956 has NOT prescribed any ceiling, rather not at all dealt with, regarding the remuneration of chief executive officer (CEO) of a company, who is simply an EXECUTIVE, but NOT a DIRECTOR on the Board.

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