It pays well to lead an organization in India, 243 times better than the average employee, to be precise. According to a recent ET report, top Indian executives are being paid handsomely and, the average compensation of the country’s top 100 senior executives (other than promoters) has increased by 12.1% to Rs. 9.8 crore in the last year. The numbers were crunched using data from Capitaline and using company annual reports.
Senior executives earn more than average workers
This number is roughly 243 times more than the average salary for employees, which stands at Rs. 5, 65,748 in the FY 2017-18 and saw a rise of 8.5% as compared to the previous year. The report also listed some of the salaries of the top paid executives (non-promoters) in the country and presented the average change in their year-on-year remuneration, excluding Employee Stock Options (ESOPs):
Salaries of some Top Paid Executives
It is important to note that all these salaries have several different components to them. For instance, almost 90% of Om Prakash Manchanda’s (CEO, Dr. Lal PathLabs) salary was accounted for by perks; and 83% of N. Chandrasekaran’s (Chairman, TCS) was in the form of commissions. On the whole, commissions accounted for anything between 40-83% of the executives’ salary in the last year. On the other hand, if ESOPs were added to the salary component, C.P. Gurnani, CEO at Tech Mahindra, bolts to the top of the list with a total salary of Rs. 150 crores.
In the BSE 500 companies, the number of senior executives, including promoters, who were paid a salary of over one crore rupees, increased by 43 to 848 in the last year. Of these, 104 executives were paid a remuneration of over Rs. 10 crores. The better than average increases in salaries, higher commission, and bonus payouts have been attributed as the top reasons for the increase in the salaries.
73% of India is concentrated in the hand of wealthy industrialists
A recent Oxfam report stated that India’s richest 1% earned 73% of the wealth generated in the country last year; and explained the level of pay gap with an example. In the course of the last one year, the richest 1% of the Indians have increased their wealth by Rs. 20,913 billion, which is roughly equivalent to the 2017-18 union budget. The report said that it will take 941 years for a minimum wage worker in rural India to earn the amount paid to a top executive at a leading garment company.
Another recent Bloomberg report found that the global CEO pay-to-average income ration in India is the second highest, only after the USA and, they reached a number of 229, close to that reached by ET estimates. However, as compared to the global average CEO salary, Indian CEOs still have some catching up to do; the average global CEO salary is nearly Rs. 23.6 crore, or $3.6 million.
Reward work, not wealth
The Oxfam report, ‘Reward Work, Not Wealth’ lists some steps that organizations can take to work towards a more equitable society by distributing wealth more evenly. The following have been quoted verbatim from the same:
- No dividends if no living wage: Multinational companies can choose to prioritise the well-being of lower paid workers by refraining from rewarding shareholders through dividends or buybacks or paying bonuses to executives and the highly paid until all their employees have received a living wage (calculated using an independent standard), and steps have been taken to ensure they are paying prices that can provide a living income for workers or producers in their key supply chains.
- Support transformational change in supply chains: Companies can prioritise sourcing from more equitably structured enterprises in their supply chains – for example, those that are part- or fully-owned by workers or producers; those that have a governance model that prioritizes a social mission; or those that choose to share some or all of their profits with workers.
- Share profits with the poorest workers: Companies can decide to share a percentage of profits (e.g. 50%) with the lowest wage earners in their supply chains and operations. For example, Cafe Direct93 shares 50% of profits with coffee farmers.
- Reduce pay ratios: Publish the company’s pay ratio between CEO and median pay; and commit to reducing this ratio to at least 20:1.
- Support collective bargaining: Publicly commit to meaningful and constructive engagement with independent trade unions on an on-going basis; and – in partnership with unions themselves – work to remove barriers to women workers participating in unions, especially in leadership positions, and promote other means to enable women workers to raise their voices safely and effectively.