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.
On the contrary, the median employee remuneration fell or remained almost same during the last fiscal, while the ratio of the top executive's pay to the median employee remuneration remained at astronomically high levels of hundreds-times in many cases.
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. While the rules do not put any restrictions on the companies regarding how much more they want to pay their top executives vis-a-vis an average employee, the Sebi regulations require most listed companies to annually disclose various remuneration ratios to help the investors know about salary practices at the firms in which they have invested.
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% of the net profit of the company. If there is more than one such director, the remuneration cannot exceed 10% of the net profit to all such directors and managers taken together.