A huge pay gap between CEOs and other employees at Indian companies has come to the fore, with the biggest listed blue-chip firms doling out to their top executives’ salary packages of up to 1,200 times of their median employee remunerations.
An analysis of remuneration disclosures made by top listed companies forming part of the blue-chip index Sensex – under directions of the capital markets regulator Sebi – shows that the pay packages of senior-most personnel, such as CEOs and executive chairmen, continue to remain high and rose further at most private sector firms during 2016-17.
The public sector companies show a totally different picture with their chiefs getting salaries of just about 3-4 times of their median employee remunerations.
However, salaries of top executives, especially in case of those related to promoter groups, typically require the approval of the companies’ boards, various committees and shareholders. Besides, the companies with inadequate profits need the government’s approval for any excessive salaries paid to their top executives.
As per the rules, the remuneration payable to any one managing director or whole-time director or manager, cannot exceed 5 percent of the net profit of the company. If there is more than one such director, the remuneration cannot exceed 10 percent of the net profit to all such directors and managers taken together.
Among the 30 Sensex firms, at least 15 have already disclosed an increase in the ratio of top executive pay with that of the median employee remuneration for 2016-17. Nine of the Sensex firms are yet to disclose these numbers and therefore the tally may go up.
Six Sensex companies have reported some decline in this ratio and these include Wipro (down from 260 times to 259 times), Infosys (283 times), Dr Reddy's Lab (from 312 times to 233 times) and Hero MotoCorp (from 755 times to 731 times).
The country's most valued firm Reliance Industries did not disclose this ratio in its latest annual report published on the website. While its chief Mukesh Ambani has capped his pay at Rs 15 crore for many years now, the ratio was high at 205 times in 2014-15.
Among other major Sensex firms, TCS saw the ratio between top paid executive pay and the median employee remuneration rise to 515 times (from 460 times in previous year), while the same for Lupin stood at 1,263-times (though down from 1,317 times) for chairman. The ratio for the CEO at Lupin was much lower at 217 times.
At Adani Ports, the ratio was down to 42 times in case of Gautam Adani (from 48 times), while the ratio was much higher at 169 times for another Whole Time Director. The same for Bajaj Auto was also high at 522 times.
Among the companies which are yet to report their latest numbers, Larsen and Toubro had disclosed a very high ratio of 1004 times for the fiscal 2005-16.
At ITC, the ratio rose from 427 to 508 times in case of YC Deveshwar, who has now given up his top executive role, but the ratio for the current executive chief was much lesser at 59 times.
Deveshwar's total package rose by 58 percent to Rs 21.16 crore, including all the benefits.
Other companies that saw an increase in the ratio included Bharti Airtel (to 366-times in 2016-17), Cipla (416 times), M&M (108 times), Tata Steel (94 times) and HUL (138 times).
In terms of the median employee remuneration, a few companies such as Wipro and Cipla recorded a decline and there was only a marginal rise of less than 5 percent for several others such as Bharti Airtel, M&M, Bajaj Auto, TCS and HUL.
The companies with an increase of over 10 percent for median employee remuneration were a few and included Kotak Mahindra Bank, Adani Ports, HDFC Bank, HDFC Ltd and Lupin.
Dr Reddy's Lab was among the very few to see a decline in the CEO pay, while it was unchanged for RIL and Adani Ports.
The companies having seen a rise in the top executive pay included Wipro, TCS, Kotak Mahindra Bank, Axis Bank, Bajaj Auto, Tata Steel, M&M, Hero Motocorp, Lupin and Bharti Airtel.
The overall key management pay rose significantly for Bharti Airtel, HDFC Bank, HDFC Ltd, TCS and Asian Paints.
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