Here is how salaries of Indian and US CEOs stack up, adjusted for purchasing power

Mukesh Ambani’s salary, adjusted for PPP in the US, would be $7.4 million.
Mukesh Ambani’s salary, adjusted for PPP in the US, would be $7.4 million.
Image: Reuters/Amit Dave
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The average salary of CEOs in India’s top Sensex firms is around Rs10 crore, having grown marginally from a year ago. The average remuneration for their counterparts in the US (DJIA companies) is ten times as much at Rs100 crore. But do CEOs at top US corporations make ten times as much as their Indian counterparts?

There is no easy answer to this question, as the quality of life money can buy differs depending on a number of factors, including the quality of public infrastructure. Some goods and services are cheaper in some cities and dearer in others. But within these limitations, a broad comparison is possible using the notion of Purchasing Power Parity (PPP).

The World Bank publishes a purchasing power parity index for all the countries in the world, denominated to the US dollar. The value for any country in the index means that it takes that many dollars in that country to buy the basket of goods you can buy in the US with one dollar. In the case of India, the value has remained unchanged at 0.3 since 2009. This means that it costs Rs20 in India to buy what will cost you a dollar (Rs60) in the US.

This means that to be making a salary comparable with their US counterparts, top Indian CEOs should be making about Rs33 crore, or three times the current level. This is of course not to say that this should be the case. India’s top corporations are dwarfs compared with large US corporations. In this PwC study of the top 100 global corporations by market cap, 46 are US companies. There is no Indian company in the list. The market cap of the 100th global corporation by size is $81 billion. The market cap of the largest Indian company (Tata Consultancy Services) recently hit $83.12 billion. That is the only company that would make the list.

Besides, CEOs are compensated in other ways, including with company stock, dividend payouts and other benefits. This makes a like-to-like comparison across countries difficult.

Going just by salary, for someone in the US to buy the same goods and services that Mukesh Ambani can afford with his salary, she needs to make Rs45 crore ($7.4 million). Ambani earns Rs15 crore from his salary as managing director at Reliance Industries. His networth is $19 billion.

Infosys’s outgoing CEO SD Shibulal had one of the lowest salaries on the list of CEOs, at Rs16 lakh. In the US, affording Shibulal’s lifestyle, on the same consideration, should cost you just $79,876. In 2013, Forbes estimated his net worth to be $770 million.

On the list of CEOs, among those with high pay packages, was Hero Motocorp’s Managing Director and CEO Pawan Munjal who got a total salary of Rs37.9 crore in 2013-14. Making that in the US would mean a pay check of $18.9 million.

The average salary for Indian CEOs has been calculated from the disclosures of the private sector companies which are a part of the stock market’s 30-share benchmark index Sensex. The average CEO pay for companies in the US has been calculated for those forming the US stock market’s 30-share benchmark index DJIA (Dow Jones Industrial Average).

The Indian average has been derived from a calculation of the disclosures made by 18 companies. Out of the 30 that make up the Sensex, six are public sector companies which pay their CEOs in line with government regulations for salaries, which are much lower. Six more companies haven’t made their annual reports for 2013-14 public yet.