CEOs of Indian listed companies draw fat paychecks—and that only widens the salary gap

Just another brick in the wall.
Just another brick in the wall.
Image: REUTERS/Adnan Abidi
We may earn a commission from links on this page.

One of India’s top tech founders, NR Narayana Murthy, recently brought attention to the widening pay gap between top-level executives and workers at the lowest levels in Indian companies. Now, new research validates his concerns.

Data compiled by Indian economists Reetika Khera and Meghna Yadav show how salary packages of top-level executives at over 40 of India’s listed companies are substantially higher than the median pay at their companies. For instance, Pawan Munjal, chairman, managing director, and CEO of Hero MotoCorp, earns 752 times more than the median salary at his company.

On this parameter, the best pay ratio was 1:39 at carmaker Maruti Suzuki.

Khera and Yadav used the companies’ filings to the Securities and Exchange Board of India (Sebi). According to Sebi’s rules, “publicly traded companies disclose the remuneration to their top management vis-à-vis other employees. The disclosures are mandated under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014,” the economists noted in their research.

Only one company, Reliance Industries, owned by India’s richest man Mukesh Ambani, did not disclose these data in its Sebi filings. Instead, RIL’s annual report noted that the data can be “furnished on request.”

Incidentally, in RIL’s case, Ambani as the company’s chairman and managing director has a fixed annual package of Rs15 crore ($2.04 million). This was decided for the purposes of “moderation.” “Compensation of Shri Mukesh D Ambani, chairman and managing director, has been set at Rs15 crore, reflecting his desire to continue to set a personal example for moderation in managerial compensation levels,” RIL’s annual report (pdf) for 2018-19 noted.

Other inequalities abound

The economists also noted that Vibha Padalkar, CEO and managing director of financial services company HDFC Life Insurance, was the only woman on the list of 42 Nifty Fifty companies. Her annual remuneration of Rs4.94 crore was also among the lowest in this list.

The lack of diversity is visible on other parameters, too.

Khera and Yadav said that there appear to be no CEOs from the Dalit community or other backward classes, and there was only one Muslim in this list.

This widening pay gap is also a cause for concern given that the pandemic drove several Indian companies to lay off staff in the past six months. Those that skirted layoffs, did so by announcing pay cuts. For instance, RIL announced a pay cut of up to 10-50% for its employees, according to their pay grades. Ambani on his part announced that he would forgo his annual salary for 2020.