Group 12

Analysis of Food Industry

Compensation trends of Nestle and Britannia

2013
Presented by: Vivek Gautam 193 Vivek Prakash 194 Vivek Vardhan Reddy 195 Vivek Vasant Nimje 196 Y Vijay Kumar - 197
National Institute of Industrial Engineering, Mumbai

Introduction
Food Industry The functional food industry, consisting of food, beverage and supplement sectors, is one of the several areas of the food industry that is experiencing fast growth in recent years. It is estimated by BCC Research that the global market of functional food industry will reach 176.7 billion in 2013 with a compound annual growth rate (CAGR) of 7.4%. Specifically, the functional food sector will experience 6.9% CAGR, the supplement sector will rise by 3.8% and the functional beverage sector will be the fastest growing segment with 10.8% CAGR. This kind of growth is fuelled not only by industrial innovation and development of new products that satisfy the demand of health conscious consumers but also by health claims covering a wide range of health issues. Yet, consumer scepticism persists mainly due to the fact that benefits associated with consuming the products may be difficult to be detected. The industry suggests the establishment of a health claim regulating agency, which may increase consumer confidence. Strict examination of some of the functional food claims may discourage some companies from launching their products. Compensation Trends A common theme in the compensation management literature is that organizations have considerable discretion in the design of pay policies. An organization accounts around 10% to 50% of the total operating costs in employee compensation and around 90 % in labourintensive organization. There is more influence in compensation which key outcomes like job satisfaction, attraction, retention, performance, flexibility, cooperation, skill acquisition. An organization always looks for the exchange where employees output to the organization, the type of contract and employment relationship. Pay level is a key attribute of compensation design and strategy because of its consequences for cost, attitudinal, and behavioural objectives, and ultimately organization performance. Although labour market and product market competition place important constraints on the choice of a pay level, research suggests that even after statistically controlling for differences in individual, job, and organization factors, organizations exhibit differences in pay level that are stable over time. The literature also suggests, however, that pay level is only one of several important dimensions of pay. For example, employee attitudes towards pay also depend on decisions regarding structure, individual differences in pay allocation, benefits, and administration. Other evidence indicates that organization differences on these latter dimensions (e.g., individual differences in pay) may be large relative to pay level differences. Even limiting the focus to pay level, our impression is that benchmarking against competitors often places too little weight on comparisons of total labour costs, or better yet, unit labour costs. Toward this end, factors such as non-salary payments (e.g., benefits) and staffing levels require closer
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attention to facilitate better evaluations of the return on investment from different pay level strategies.

Review of Literature
Employee Compensation Articles Review

1. The Use of Options in Compensation Packages by

Jeffrey A. Williamson and Brian H. Kleiner, May 2004 Objective: The article intends to focus on the importance of stock options as a component of employee compensation and the advantages on the work productivity and efficiency of the employees. Summary: The article explores the growing trend of stock options as a part of employee compensation in the context of todays competitive environment where firms are looking to attract and retain workers. Though the culture of stock options is very common in start-ups the stock options have been in use since 1950s as bonuses (albeit restricted to top management). The recent trend is that of the so called broad based stock option plans, that provide ownership to executives and non-managers. The number of companies in America offering this compensation structure has sharply increased from 10% in 1994 to 45% in 1997. This option is popular both with the management and the employees as the employers have recognized potential gains in productivity and the workers realize that their fortune is tied to stock performance strive to work harder. One of the most important elements in making a stock options plan successful is an effective communication programme. Linking employee interests with those of shareholders may produce unintended results such as higher turnover and potentially lower productivity when the employee feels disenfranchised by ignorance resulting in loss of wealth. A stock option is a security that represents the right, but not the obligation, to buy or sell a specified amount of stocks at a specified price within a specified period of time. The specified price is set when the grant is offered, and is commonly referred to as the strike price. The stock options have a number of caveats. The difficulty in implementation of stock options is that the owner of the option must buy the stock at the strike price, but many employees lack the capital to purchase these stocks. The firm usually stipulates a vesting period within which the option cannot be exercised. This is done to discourage employees from immediately cashing the stock and then leaving. The two Marketability is a concern if there is no public market for the exchange of such securities. In this case the option to convert the option gets reduced drastically. The stock options are widely popular due to benefits in taxation. The cash component paid in place of stock option is taxable as per income tax laws, but the stock option is not. Once the
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option is realized the person has to pay capital gains tax which is lesser compared to income tax. One of the most important reasons firms offer stock option is to attract and retain employees and to align the interests of the employee with the company objectives. The underlying incentive for employees is to take steps to increase share value, such as driving sales growth, achieving greater efficiencies, controlling costs. The firms are forced by labour markets to pay higher wages in order to recruit and retain skilled workers. Stock options, by contrast, can be offered to employees as an additional benefit with potential tax savings benefits and cost less than issuing common stock outright. There are two types of stock option plans, the incentive stock option plan (ISO) and the nonqualified stock option plan (NSO). Employee, by treating the income from the stock option exercise and sale as capital gains, subject to 20% tax rate, instead of ordinary income which can be taxed up to 39%. Non-qualified Stock Options by comparison to ISOs are much more flexible for both the employer and employee. Britannia Industries Ltd. Industry group Main product / service Ownership group Bakery products Biscuits Wadia (Bombay Dyeing) Group Entity type Incorporation year Size group Public Ltd. 1918 Top decile

Britannia Industries Ltd is the leading bakery products company in India with a predominant focus on sale of branded biscuits. The company's history goes back to 1892, when it was incorporated in Kolkata under the name of Britannia Biscuit Company. BIL got its current name in 1979. Four years later, in 1993, the Nusli Wadia group acquired a stake in BIL's parent, Associated Biscuits International Ltd, UK and became an equal partner in BIL with French Major, Groupe Danone. The company is engaged in the business of biscuits, bread, cakes and rusks. It caters to diverse needs and tastes of the Indian consumer across age groups through its optimum range of biscuit brands. Some of its popular brands are -- Tiger, Good Day, Marigold, Milk Bikis, Treat, and 50:50, Little Heart, Bourbon, Pure Magic, Snax, Premium Bake and Nutrichoice. The company's strategy of consistently renovating its existing brands and launching new ones has helped it garner larger share of the Indian biscuits market every year. In 2005--06, its market share stood at 37.2 per cent. Britannia is the pioneer in the sliced bread business in India. Today, it caters to almost half the branded bread market in India. Its cake & rusk business, albeit small, has been growing at a healthy pace. However, the bread, cakes & rusk business together accounts for only 8.9 per cent of BIL's turnover. It is essentially a biscuit company with 90.2 per cent revenues coming from sale of biscuits. What makes Britannia unique amongst its peers is its contract manufacturing model. The company outsources entire production of bread, cakes & rusk sold by it. Around 76 per cent of its biscuits are also produced by third party units. The company has a biscuits manufacturing capacity of 1, 63,500 tonnes per annum, spread over five units located at Delhi, Mumbai, Chennai, Kolkata and Uttaranchal. Of these, the Mumbai facility was closed in March 2004 and a legal case between the labour union and the management is pending in the Mumbai High Court.
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The company is investing Rs.130 crore from its internal cash reserves towards capacity addition. The new capacities are being added on the basis of the region's tax structure and the company's strength there. It is also believed to be adding capacities at its contract manufacturing units at West Bengal, Assam, Pondicherry, Kanpur and Nagpur. The company has also been following the inorganic route of expansion quite actively in the recent past. It made its first international acquisition in March 2007 by buying 70 per cent stake in Strategic Food International Co LLC, Dubai, a leading company in the biscuits and cookies segment in the GCC (Gulf Cooperation Council) markets. In July 2005, it acquired 50 per cent stake in Bangalore--based Daily Bread. The company believes that this acquisition will help it increase its presence in select markets with a range of gourmet sold under the brand names -- Daily Bread and Deluca. In addition to the bakery business, Britannia runs its dairy operations through its joint venture Britannia New Zealand Foods Pvt Ltd. This joint venture with Fonterra of New Zealand was formed in 2002 by demerging the dairy products business from BIL. The relation between Britannia's major stake holders -- Wadias and Danone, has turned sour since 2005--06 over the alleged unauthorised use of the Tiger brand by Danone in five countries; viz. Singapore, Pakistan, Malaysia, Indonesia and Egypt. Britannia has filed a case against Danone at Singapore court regarding the same. The fight between the two groups is not just limited to the usage of Tiger brand. The Groupe Danone is exploring the option of selling off its stake in Britannia and operate in the Indian dairy and bakery products market independently. However, the Group has a joint venture with the Wadia Group -- Wadia--BSN -- signed in the early 1990's, which requires it to work with the Wadias in all its future businesses in India and gives Wadias the first right of refusal.

Mar-07 -08 In an intensely competitive biscuit environment, all Power Brands of the Company recorded double digit growth, with Tiger and Good Day growing in excess of 20%. Britannias innovation forays have successfully addressed new benet clusters and Nutri Choice Digestive has claimed its position in the health and vitality space. Britannia continues to maintain its leadership edge in 6 out of 7 key product segments, the only exception being Glucose. The business continued to face inationary pressure in key raw materials such as wheat our, rened palm oil, skimmed milk powder and other dairy products, as well as energy costs. These were more than offset on the cost side through operational and procurement efciencies, productivity improvements, cost reduction programs and on the revenue side through improved product mix and higher realisation, aided by strong consumer off take. Exceptional items for the year include Rs. 130.5 Mn towards amortisation of VRS costs. Earnings per share are Rs. 80 compared to Rs. 45 last year.

Mar-08 - 09 In a year of economic & market uncertainty your Company added Rs. 5,281 MN to the net turnover and achieved a sales growth of 20.4%. Profit from operations increased 13.5%. Net Profit for the year at Rs. 1,804 MN was achieved in the context of another year of high commodity inflation, especially wheat flour, sugar & laminates, taking the operating margin to 7.3% in 2008-09. Net Cash Flow from operating activities for the year was Rs. 2,468 MN compared with Rs. 631 MN in the previous year. Consistent with Britannias priority of investing for growth, Capex for the year was Rs. 678 MM compared with Rs. 666 MM in the previous year. Exceptional items for the year include Rs. 249 MM towards amortization of VRS costs, Rs. 390 MM towards provision for doubtful advances. To a subsidiary, Rs. 205 MN towards write back of previous years liabilities no longer required and Rs. 228 MN towards capital receipt for settlement of litigation with Groupe Danone. Earnings per Share are Rs. 75.51 compared with Rs. 79.95 last year. In retrospect, 2008-09 was a mixed year, characterized by continual and high commodity inflation and a slow-down in GDP and disposable income growth in the 2nd half of the year. This impacted Britannias growth, reducing it to 17.2% as compared to 24% in the 1st half. Market and consumer sentiment were partly affected by the global economic crisis and partly by a reduction in market liquidity, especially with organized trade, making consumers more cautious & discerning. In this scenario, Britannia fortified its strategy of investing in its 6 Power Brands, added a 7th, and simultaneously restructured operations. Over the last 4 years, Britannia has taken Rs. 1,800 MN of cost out of the system. This has been achieved by consolidating operations where relevant, optimizing manufacturing units, reducing complexity and eliminating wastages in the value chain. Additionally, Britannia continued to sharpen its consumer & customer insight to identify new sources of growth and profitable revenue generation. This resulted in initiatives to energise power brands and open up new consumption occasions & opportunities. As an example, the on-the-go consumption opportunity has led to the successful. Launch of brands and packages, conveniently priced at Rs. 5/- for personal
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consumption. Once again, consumers voted brand Britannia among the Top 10 Most Trusted Brands across all categories for the 5th successive year in an independent survey conducted by AC Nielsen and The Economic Times. Britannia was rated as the 2nd Most Trusted Food Brand and the 7th Most Trusted Brand across all categories in 2008. The value of the Britannia brand was also recognized internationally with Time Magazine in its issue of 17 August 2008, quoting the collaborative partnerships that Britannia has created in the nutrition space, as one of 8 examples of creative capitalism from around the world. Britannia extended its international footprint with exports more than doubling to Rs. 555 MM. Further, operations in Sri Lanka commenced with a select range of Power Brands, which have had a positive response from both consumers & trade.

Mar-09 10 The year witnessed unprecedented commodity inflation, particularly in sugar, wheat and milk products, in the latter half of the year, coupled with a fiercely competitive environment. This restrained Britannias ability to correct selling prices and had a high adverse impact on margins and profitability. Consequently, whilst Britannia added Rs. 2,817 MN to gross sales, Profit from Operations declined by Rs. 778 MM, excluding provisions for certain one-off items aggregating Rs. 258 MM for certain disputes relating to a long term lease, excise duty demand and obligation arising from a past acquisition. Net cash flow from operating activities was Rs. 2,353 MM, achieved by a disciplined approach to managing working capital. Exceptional items for the year include Rs. 329 MM towards amortization of VRS costs and provision of Rs. 200 MM for losses arising from Sri Lanka operations and closure. In retrospect, 2009-10 was a challenging year with the country going through an economic slowdown in the first half, unprecedented inflationary pressures on the consumer food basket and exceptional input commodity inflation for the food industry. Additionally, britannia focused attention on building new capabilities and a robust pipeline of innovation. Coupled with leading edge go-to-market approaches these innovations tap new sources of growth and profitable revenue, while building brand differentiation and relevance. New products like Britannia Cookies and Treat Choco-Decker were launched, leveraging new capabilities, to open up new growth vectors. Consumption opportunities were successfully tapped and widened through introduction of regional brands like Britannia Top, extensions of existing brands, like Nutri-Choice Nature Spice and on-the-go consumption at the Rs. 5 price point was enlarged and now contributes in excess of 10% of britannias business. Once again, consumers voted brand Britannia among the Top 10 Most Trusted Brands across all categories for the 6th successive year in anindependent survey conducted by AC Nielsen and Economic Times. Britannia was rated as # 2 Most Trusted Food brand and # 9 Most Trusted brand across all categories in 2009. Mar-10 - 11 Against this adverse economic scenario and continued competitiveness that eroded the overall industry profit pool, Britannia continued to focus on its growth strategy, led by its Power Brands and at the same time restructured operations to reduce cost. Britannia bakery
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brands including cake, rusk and bread grew 23.9% with biscuit brands outpacing market growth . 2010-11 saw Britannia entering new consumption segments, with the pilot launch of Breakfast Cereals - Britannia Healthy Start in Mumbai. This is a delicious and healthy ready-to cook range of breakfast options like porridge, oats, upma and poha mixes. Growth momentum continued and escalated in the emerging categories Breads, Cakes and Rusks. Britannia is investing behind these categories and building consumer relevance and brand differentiation through new products, new consumption moments as well as through new communication. Export out of India continues to grow rapidly at over 30%. Britannia has added dairy products to its exports range. During the current year the Company is expanding the range of products and opening new channels of distribution in key markets. While the business environment continued to be challenging and competitive, consumers continued to buy and consume more of the Companys brands, more often. Britannia was ranked as the Most Respected FMCG Company by Business World. Consumers once again voted brand Britannia as # 1 Most Trusted Food Brand and # 5 Most Trusted Brand across all product categories in an independent survey conducted by A C Nielsen and The Economic Times. Brand Britannia also entered the Hall of Fame as it has been voted among the Top 10 Most Trusted Brands for a continuous period of 10 years. Nestle India Ltd. Industry group Other agricultural products Main product / Food products, beverages & tobacco service Ownership group Private (Foreign) Entity type Incorporation year Size group Public Ltd. 1959 Top decile

Nestle India is the largest dairy products company in India listed on the bourses. A subsidiary of Nestle S.A. of Switzerland, the company was incorporated in 1959. It set up its first factory at Moga, Punjab in 1961. However, the company's history goes back to 1912, when it began importing and selling products in India under the name of `The Nestle Anglo Swiss Condensed Milk Company (Export) Limited'. With a broad product portfolio of milk products & nutritions, beverages, prepared dishes & cooking aids and chocolates & confectionary, the company generates above Rs.3,500 crore income annually. Its milk products & nutritions portfolio encompasses a wide range of products right from milk and skimmed milk to value added products like condensed milk, curd, ghee, yogurt and raita. These products are sold under various popular brands -- Nestle Every day, Nestle Milkmaid, Nestle Milk, Nestle Fresh n Natural etc. Owner of the most famous Cerelac brand, Nestle India enjoys the leadership position in infant milk foods business with a market share of 68.4 per cent (2006--07).

The company has a capacity to produce 72,502 tonnes of milk products & nutritions per annum, spread over seven plants located across India -- Punjab, Haryana, Uttarakhand, Goa, Karnataka and Tamil Nadu. It processes over 3.3 lakh tonnes of milk and nearly 10,000 tonnes of milk powder per annum. The milk is procured from over 85,000 farmers in Moga, Punjab. The milk products & nutritions business accounts for 43.7 per cent of the company's revenues (2006). To take on the competition from new strong entrants like Reliance and grow further, Nestle has chalked out ambitious plans, which include new product launches, capacity expansion and acquisition. The company has tied up with Heritage Food in south, Bengal Nester in the east and Dynamix Dairy in the west for sourcing, processing, packaging and supplying milk. It is also planning to expand its manufacturing capacities at Moga and Samalkha, while acquisitions in existing and new categories remain pretty much in the company's radar. After the successful launch of low fat parabiotic curd,`Nestle Nesvita', the company is planning to introduce a specially formulated milk for diabetics. Under its beverages segment, Nestle India mainly sells instant coffee. It is the largest coffee company in India, commanding market share of 11.2 per cent (2006--07). Its coffee is sold under three brands -Nestle Classic (100 per cent pure instant coffee), Nescafe Sunrise (a 70:30 per cent combination of coffee and chicory) and Nescafe 3 in 1 (mix of coffee, dairy creamer and sugar). Besides, it sells a malted chocolate drink, Nestle Milo. The beverages division contributes 20.5 per cent to the company's revenues (2006). Around eight per cent of Nestle's sales come from exports, which mainly comprise of coffee. The company exports instant coffee to various countries such as Russia and Japan. Besides, it also exports some of its other products. Nestle's Maggi 2--Minute Noodles has become an almost synonymous name for instant noodles in India. Looking at the popularity of `Maggi', the brand was also extended to other culinary products such as sauces, pizza sauce, healthy soups and magic spice cubes. The company also introduced new variants of noodles such as Vegetable Atta Noodles, Dal Atta Noodles and Rice Noodles Mania under its Maggi Noodles umbrella in the last few years. The business contributes 20.3 per cent to the company's sales revenues (2006). The company also has a strong presence in the chocolates & confectionary business. With a 18.5 per cent market share (2006), it is the second largest confectionary company in India. The company sells its world famous Kit Kat brand in India along with some other brands such as Nestle Munch (wafer chocolate), Nestle Milkibar, Polo (mint confectionary) etc.

Reason for low salary in 2008: Outsourcing and casualization rampant in Nestle India: Nestle is using extensive precarious employment arrangements in its Indian operations, including outsourcing to co-packers whose workforce is wholly casualized. In many of Nestle Indias own operations contract workers are in the majority. The Kit Kat plant in Goa, for example, employs 156 permanent workers and over 400 contract workers. The Maggi plant in Goa employs 140 permanent workers and 250 contract workers, while the plant in Samalkha producing noodles, yoghurt, Cerelac and Lactogen employs 175 permanent workers and 200 contract workers. At the Nestle plant in Mysore District, Karnataka, there are 120 permanent workers and 250 contract workers. There are 3 categories of contract worker on daily wage rates of Rs 60, Rs 80 and Rs 100 ( 1.00, 1.34 and 1.68) who are hired on a daily basis. Every day these
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contract workers have to report to the factory gate before starting time and compete to secure a work assignment. According to a report by the IUF Outreach India Office: The contract worker who comes first to the gate gets his turn to do the duty in that order, they try their luck, some time they have to return back home because someone has reached the destination before him. On an average a contract worker works 20 days in a month. The management prevents contract workers completing more than 240 days in a calendar year so that these workers cannot exercise the legal right to claim permanent status. So under the contract system, the company employs 25% more contract workers than needed, so that the workers are forced to compete for work everyday and cannot accumulate more than 240 days in a year.

Reason for salary increase in 2009: 205 workers at Nestl Indias Samalkha factory in Haryana state went on strike 4-5 July to protest the suspension of their union chairman Bijender Singh Gahlan for organizing nondisruptive protest actions including wearing black armbands and boycotting voluntary social functions. The union was demanding wage adjustments to compensate for the soaring cost of foods, including Nestls own products. The Nestl Employee union at the Moga factory in Punjab state organized solidarity for the Samalkha union by boycotting the canteen and demonstrating outside the factory gates. Coordinated action among local unions at Nestl India is a relatively new phenomenon. Like other global food and drink companies, Nestl is looking to rapid growth in its already profitable operations in India, China, Russia and other large emerging markets to offset stagnating markets and profit margins in Western Europe, Japan and the USA. Nestl workers organizing and fighting for their rights in emerging markets threaten the companys global strategy.This is the context in which Nestl has systematically tried to quash union rights. On 21 July the striking workers at Nestl Samalkha suspended their strike for six weeks pending an investigation by the State Labor Commissioner into the suspension of the union chairman, and the results of a tripartite inquiry into their claim for wage adjusments for inflation. 2009 Scenario: Companies increase salary: Almost all Indian companies have given or will give their employees a pay hike this year, a survey showed, pointing to optimism in corporate India that the economy is on the rebound. One in every two companies in India raised the salaries this year, as human resources consulting firm Mercer's survey found. Covering 2,100 companies globally, including 87 in India, the survey revealed that Indian companies consider workforce reduction as the last resort and will continue to adjust employee salaries with inflation. "So, it was important they continued benchmarking salaries according to the prevailing market levels. Another reason could also be that the Indian economy witnessed inflationary trends during 2008, which is why many companies might have opted for salary increases." Globally, two-thirds of companies said that their salary budgets were either cut or stagnated compared to 2008. While just one in six Indian companies resorted to wage cuts, one in every three firms internationally pruned employee salaries.
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In the short term, many organisations might have had to tackle people costs with wage freezes and retrenchment, but with recovery around the corner companies seem to be taking active steps to manage and retain their key talent. Companies are now gearing up to be ready for growth opportunities once the upturn comes about. The survey also showed a significant proportion of companies continuing with their hiring plans. More than 30% of the companies surveyed in India said they will expand their workforce and another 37% of the companies expect replacement hiring. Besides hiring, companies are focusing on the health of employees this year by introducing wellness programmes. In India, around 40% of the companies surveyed said they are likely to add wellness programmes too, and around one in five said they are likely to provide healthrelated services in the workplace. Reasons for decrease in salary in 2010: Despite a challenging cost environment Nestle India's presence in the high-growth categories where competition is moderate helped it report a strong performance in 2010. The new products, which the company plans to introduce at various price points, and its expansion drive, which is well on track, are expected to help it maintain its growth momentum in 201112 also. To double sales by 2014, Nestle India undertook capital expenditure of Rs 450 crore in 2010, nearly twice the capex in 2009. The company received $450 million in debt funding from the parent company for the expansion, which will be completed by 2013 in a phased manner. In 2010, Nestle reported a YoY domestic sales growth of 23%. Its volumes grew 17.6%, supported by a bigger product portfolio and wider reach. The highest volume growth was in the premium segments such as prepared dishes (27%) and chocolates & confectionaries (21%). Other business segments include milk product, beverages and nutrition. The company has been trying to aggressively expand its reach. In 2010, it added 464,000 new points of sales. In the coming years, it intends to focus on penetrating the tier-II , III and IV towns to support the additional production volume from the new capacities. Nestle's key raw materials include commodities such as palm oil, milk and coffee. Despite the increase in its commodity cost index by 10% last year, the company maintained operating margins at close to 20%. However, its profitability could come under pressure due to the continued upward trend in inflation. The prices of some of the inputs have shot up by 10-20 % since the beginning of the current year. Also, the levy of 1% excise duty on processed food items, such as tomato ketchup and pasta, may have a marginal impact on Nestle India. Though the high input cost remains a challenge, the company's margin is not expected to fall below 17-18 %. Considering the rising consumer demand for premium products, the company's plan to enhance its premium product portfolio may help it restrict the fall in margin. Good demand for its products, timely capacity expansion and new products would be critical for its long-term growth. CEOs take 27% hike as profits dip: Chief executives of Indian companies helped themselves to a 27% hike in salaries at a time when their companies' net profits fell by almost a third compared with the previous year. Overall, four out of every five CEOs covered by the study got a pay hike, even as half of the companies covered reported lower profits or made losses in 2008 over the previous year. Headhunters say salaries of top executives in Indian cos are not linked to the company's performance. "Although pay for performance as an issue is becoming important in India, traditionally, we haven't seen top management taking any drastic pay cut," said Atul Vohra, managing partner of headhunting firm Transearch.
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He said Indian companies' financial performance has not deteriorated to the same extent as those of their global counterparts. Several CEOs in the US had come under criticism for claiming fat bonuses despite lording over multi-billion dollar losses. Besides, those who pocketed more when their companies performed poorly, there were others who were paid more for generating higher profits. For instance, food products major Nestle India CEO Martial Rolland, who has now been moved to a different role within the Nestle group, got an 18% hike in compensation to Rs 6.24 crore in 2008 when the company generated 29% growth in net profit. GlaxoSmithKline Pharmaceuticals' CEO Hasit Joshipura got a 23% hike in remuneration to Rs 1.97 crore when the firm reported 8% profit. Reason for salary increase in 2011: Nestl India unions win recognition, and wage bargaining rights In a major win in the closing weeks of 2009, unions representing more than 1,200 workers at Nestle Indias factories in Moga, Ponda and Bicholim signed collective bargaining agreements on wages and benefits for the first time - marking a major achievement in their year-long struggle for the right to wage bargaining. The agreements also include wage scales and wages information that was previously were declared secret by management. This achievement is even more remarkable because Nestle India management refused to recognize the union at Nestle Ponda, Goa, when it was formed in 2001, resulting in a legal case that management deliberately delayed for eight years, seeking no less than 54 adjournments. In November 2008 the unions, which are members of the IUF-affiliated Federation of All India Nestle Employees, called for an end to the system of unilaterally imposed annual wage increments and demanded the right to negotiate wages. Nestl India management refused to negotiate and instead obtained court injunctions permanently banning union actions within 50 to 200 metres of four factories (Moga, Samalkha, Ponda and Bicholim), effectively denying Nestl India workers their fundamental right of assembly. This led to an escalation of the campaign, with weekly protest actions launched on 16 April 2009 and culminating in a mass rally at the Nestl India headquarters in Gurgaon, just outside Delhi, on 25 May 2009. The IUF supported the campaign throughout and in May 2009 filed a formal complaint against Nestl for violations of the OECD Guidelines on Multinational Enterprises. In addition to weekly demonstrations at each factory and the rally at Nestl India headquarters, union members in Ponda and Bicholim boycotted all company-sponsored events and refused to work overtime for more than half a year - a tremendous sacrifice at a time when food price inflation was already eroding their wages. Faced with this continuous pressure at local, national and international levels, Nestl India management finally entered into wage negotiations for the first time in September and negotiations were concluded in December - a major step towards genuine recognition and respect of trade union rights after decades of rights violations. Fourth Nestl India Union in Recognition and Bargaining Win On January 5 the union at Nestl Pantnagar, the company's newest (2006) and largest plant in the country, signed a first collective agreement on wages and benefits, joining its 3 sister unions in the IUF-affiliated Federation of All India Nestle Employees in finally winning the right to negotiate terms of employment.

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Comparition of Britannia Industries and Nestle India Ltd.

Britannia Industries Britannia Industries Currency: Rs. Million (Non-Annualised) Total income Total Salary Ratio of Salary to Income Percentage increase in Income of Britannia Industries Percentage increase in Salary of Britannia Industries Mar-07 12 mths 24210.9 888 0.0366777 Mar-08 12 mths 26732.1 1057.2 0.039548 Mar-09 12 mths 33118.5 1240.3 0.0374504 Mar-10 12 mths 35636.7 1323.8 0.0371471 Mar-11 12 mths 43594.9 1199.3 0.0275101

10.413491 19.054054

23.890379 17.319334

7.6036052 6.7322422

22.331473 -9.4047439

Nestle India Nestle India Currency: Rs. Million (Non-Annualised) Total income Total Salary Ratio of Salary to Income Percentage increase in Income of Nestle India Percentage increase in Salary of Nestle India Mar-07 12 mths 37316.7 3569.3 0.095648865 Mar-08 12 mths 45049.5 3319.1 0.0736767 Mar-09 12 mths 52671.6 4556.3 0.0865039 Mar-10 12 mths 64192.4 4584.7 0.0714212 Mar-11 12 mths 77284.2 5680.4 0.0735001

20.72209 7.0097778

16.919389 37.275165

21.872888 0.6233128

20.394626 23.899056

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Britannia Industries Ltd.

Britannia Industries Ltd. Ratio of salary vs Income of organisation No. of employees vs income of organisation
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

3.67% 0.094998 534

3.95% 0.089779 703

3.75% 0.0603 89

3.71% 0.0561 22

2.75% 0.045876 93

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Nestle India Ltd.

Britannia Industries Ltd. Ratio of salary vs Income of organisation No. of employees vs income of organisation
Mar-07 Mar-08 Mar-09 Mar-10 Mar-11

9.56% 0.10

7.37% 0.1043296 82

8.65% 0.0949 28

7.14% 0.0872 38

7.35% 0.08539909

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Conclusion: The fact that stock options now account for more than half of total CEO compensation and 30% of operating managers pay, at the largest U.S. companies (Rappaport, 2001: 91) warrants a debate whether or not stock options achieve their intended purpose of tying pay to performance. Detractors argue that share price gains, more often than not, are the result of external factors such as business sector cycles and the overall equity investment climate, hence every employee can get the same benefits irrespective of his performance. On the contrary, in companies that demonstrate a true commitment to creating an ownership culture, stock options can be a significant motivator. It can be safely deduced that in the future the structure of stock options plans are likely to change depending upon the overall objective.

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