Head honchos of brokerages like Geojit BNP Paribas and Edelweis

• Posted by Sindhuri G August 29, 2012 - Filed in Business - 2,004 views

  MUMBAI: Head honchos of some of the top brokerages have taken salary cuts in line with the decline in net profit amid gloomy stock markets and falling volumes. The smaller pay packets are reflective of their stronger linkages with profitability over the past few years.
  
  The compensation of chairmen and MDs of broking houses and financial services companies such as Geojit BNP Paribas, Edelweiss and Motilal Oswal Securities have fallen 15-68% in FY12 from a year ago. Over the same period, the net profit of these companies has declined between 24% and 45%.
  
  Said Edelweiss group Chairman and CEO Rashesh Shah: "The salaries of senior management in the financial services industry have been getting correlated with net profit over the past few years. Typically, the variable component of senior management in, say, broking, is 50%. In a bad year like FY12, the worst since FY09, my guess is there's bound to be a haircut on the variable aspect."
  
  Shah attributed the poor performance of broking in FY12 mainly to a shift by investors from capital markets to avenues like bank fixed deposits amid high interest rates and to lower volumes. He added that a 30% decline in net profit normally resulted in a CEO's pay packet shrinking by 20%.
  
  SOME EXCEPTIONS TOO
  
  Total cash market volumes on the NSE fell by a fifth to Rs 28.1 lakh crore in FY12 from a year ago, ET data shows.
  
  Derivative volumes on NSE rose by a mere 8% to Rs 313 lakh crore, but brokerage on, say, index options, is on the premium and not the notional value.
  
  E Balaji, MD & CEO, Randstad India, a staffing firm, and CJ George, MD, BNP Paribas Financial Services, agreed with Shah that the higher the variable component in salary, the greater the chances it would get impacted by shrinking profitability. "Though not the only tool to measure a CEO or MD's performance, net profit is important since the variable component tends to make up as much as 40-50% of a top broker's salary," said Balaji.
  
  However, not all CEO and MDs have taken a cut despite a decline in net profit.
  
  Of the 14 brokerages and financial services companies that ET analysed, CEOs of nine took a cut in salary. Sunil Godhwani, chairperson & MD of financial services group Religare Enterprises (REL), and Aseem Dhru, MD & CEO of HDFC Securities, were notable among the five senior management personnel whose pay packets actually rose.
  
  Godhwani's pay packet jumped a whopping 517% as REL's loss shrank to Rs 213 crore in FY12 from Rs 300 crore a year ago while Dhru's salary rose 34%.