A parliamentary panel headed by senior opposition leader Yashwant Sinha has recommended that the government make it mediatory for the companies to have a committee tasked with the responsibility of determining the salaries of key managerial personnel  

The panel’s recommendation to place a cap on the salaries given to salaries of chief executive officers has once again kicked started a debate of the issue that has been discussed around the world since the global economic crisis on 2008. The recommendation is an attempt to control the extravagant remunerations given to CEO’s of some companies.

Parliamentary Standing Committee on Finance, which presented its report on Companies Bill 2009 in the Lok Sabha last week,  said, “The committee is of the view that an overall outer ceiling on managerial remuneration may be prescribed.”

Prime Minister Manmohan Singh himself had sparked the debate when he proposed cap on CEO salaries soon after the economic crisis hit the world economy. The report has been submitted after eight months of considerations on the issue.

At present, the total remuneration paid to managerial personnel cannot be more than 11% of net profit and an individual manager cannot receive more than 5% of net profit, according to section 198 of the Companies Act 1956. Any companies which intends to give salaries above the limit has to apply for an approval from the corporate affairs ministry.

The revised Companies Bill is expected to be presented to the Parliament in the winter session or later in the budget secession, according to Corporate affairs minister Salman Khurshid.