do not clearly disclose the bonus, variable pay or incentive component of CEOs’ compensation and include it in the overall salary. But those that clearly declare bonus in their annual reports — ICICI Bank, Axis Bank, and HDFC Bank — showed that the CEOs received deferred bonuses of previous years, but the bonus for 2016-17, if at all, was minimal or missing. Unlike in the past years, the ICICI Bank and Axis Bank were silent about the 2017-18 bonus, since approval for the previous year did not come from the RBI. HDFC Bank said in its 2017-18 annual report that “bonus pertaining to the year 2016-17 proposed to be paid out in 2017-18 is pending RBI approval”. Interestingly, both ICICI Bank and Axis Bank, which have both been beleaguered for various reasons, have seen a rise in the basic pay and allowances of their MDs.
In 2017-18, ICICI Bank’s Kochhar was paid a bonus of Rs 2.1 million, including “deferred portion of bonus approved in earlier years that was paid during 2017-18”. The bonus paid to Kochhar during 2016-17 was Rs 4.5 million (including deferred payment). For 2016-17, Kochhar was also awarded a bonus of Rs 22 million by the bank board (which was subject to RBI approval).
Sharma received a deferred variable pay of Rs 4.4 million during 2017-18, relating to the 2014 and 2015 fiscal years, according to the 2018 annual report. According to the 2017 annual report, Sharma was supposed to be getting Rs 13.5 million for the fiscal year. However, the RBI has still not approved her 2016-17 bonus, said the bank’s latest annual report.
Emails sent to ICICI Bank, Axis Bank, and HDFC Bank went unanswered. Kochhar’s basis pay rose 15 per cent to Rs 30.7 million, while Sharma’s grew 7 per cent to Rs 29 million. Perquisites and allowances and retiral benefits also rose for both. Not only did both ICICI Bank and Axis Bank see poor performance in 2017-18, Kochhar and Sharma have been under scrutiny.
Kochhar is being investigated on conflict of interest charges in a loan given to the Videocon group. In Sharma’s case, the RBI had raised questions over her reappointment by the board, and Sharma then decided to resign in December 2018. Besides bad loans like ICICI Bank, Axis Bank is also facing inquiries into earnings leaks over WhatsApp.
Both Axis and ICICI Bank were also found to be under-reporting their bad debts. The divergence between what Axis Bank reported and what RBI auditors found was to the tune of Rs 56.32 billion in 2016-17 and Rs 94.78 billion in 2015-16. For ICICI Bank, the divergence for 2015-16 was Rs 51 billion and there was no divergence in 2016-17.
Experts say that not all private sector chiefs get compensated based on their performance alone. “It should be performance-linked, which is not the case currently,” said Anil Singhvi, chairman of Ican Investment Advisors.
Bank CEOs continue to earn hefty compensation by way of stock options. There was no reduction in Kochhar’s stock options over previous year at 1.5 million shares, while Sharma’s reduced from 900,000 in 2016-17 to 540,000 in 2017-18.
With inputs from Pavan Lall
According to Singhvi, there has not been paring down of financial incentives to bank executives so far, and it is still early days for activist shareholders and a unified platform where the external stakeholder can be heard. “In the future, however, when the going gets tough and numbers start to falter there are no doubts the questions are going to start to get louder and harder,” he adds.
At any cost
Latest annual reports of ICICI Bank and Axis Bank silent on 2017-18 bonus of their MDs
Top CEOs only paid deferred bonuses of previous years
Basic pay and allowances for the CEOs rose over previous year