Mukesh Ambani, head of Reliance Industries has decided to forgo his entire compensation as the company announced salary cuts and deferment of performance linked payments for its employees. The hydrocarbon industry has been severely hit due to weak demand amidst the Covid-19 pandemic.
Prime Minister Narendra Modi has urged industry not to cut jobs even as companies struggle due to the crisis created by the pandemic and the subsequent nationwide lockdown. RIL, India’s most valued company, has decided to cut costs by reducing compensations to employees, among other measures, to face challenges faced by its businesses.
Besides Ambani, the board of directors, including executive directors, executive committee members and senior leaders, will also forgo 30-50% of their compensation, the company said in a letter to employees.
“The hydrocarbon business has been adversely impacted due to reduction in demand for refined products and petrochemicals. This has of course put pressure on a hydrocarbons business necessitating optimisation and cost reduction across all fronts. The situation demands that we maintain a razor sharp focus on operating cost and fixed costs and all of us need to contribute to make this happen,” Executive Director Hital Meswani said in the letter.
In the hydrocarbon business, salaries of those earning less than Rs 15 lakh a year has been left unchanged. But those with compensation higher than Rs 15 lakhs per annum, will have a 10% reduction in fixed pay.
RIL has also deferred annual cash bonus and performance linked incentives, which are normally paid in the first quarter of a fiscal year. So far, the salary cut and deferment of variable components is restricted to the hydrocarbon business; no such announcement has yet been made about other businesses.
“We will closely monitor the economic and business environment, re-evaluate a response to the situation on a continuous basis and strive to improve the earning capacity of our business. The lockdown period has also provided us with several opportunities to reorganize ourselves and digitalise our business process to generate significant improvements in our productivity, efficiency and costs. Together we will embrace these opportunities and work towards restoring our compensation levels to normalcy,” Meswani said.
Ambani’s salary in 2018-19 was Rs 15 crore, unchanged for the eleventh consecutive years. Even as he forgoes his compensation, he would still be eligible for a hefty dividend payment for his shareholding in the energy conglomerate.
The company has a board meeting today to discuss a potential rights issue of shares, its first in 30 years, as a part of its strategy to become debt free by 2021.