Economic Value Added and Employees’ Compensation: A Study of the Indian FMCG Sector

Abstract

This paper aims at analyzing the impact of economic value added (EVA) on employees’ compensation
in the Indian FMCG sector. Methodology: Quantitaive method has been used in this study.The sample in this
current study includes all the sixty-nine companies of BSE FMCG sectoral index, covering the time period from
2011-12 to 2015-16. Prowess has been used for sourcing data in this study.Results: The results of the study show
that the owners and managers may not be the same person in case of public limited companies, the managers may
not work in the interest of the shareholders and thus the objective of maximizing shareholders’ wealth may be
defeated. hence, the main challenge with the top management (promoters and board members) is how to align the
interest of shareholders and managers in the Indian FMCG companies.On an average 29% of increase in EVA is
shared or distributed amongst the employees of the companies. Implications: The results of the current study
may be of importance to the top management of FMCG companies in creating the shareholders’ value and at the
same time making managers to feel like owners.