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As Starbucks’ new CEO Brian Niccol is set to be one of the highest paid CEOs with a $110-million package, the focus is on the CEO pay multiple, the ratio of remuneration of a company’s top management vis-à-vis other employees.
This metric, which is a mandatory disclosure for listed companies in India, explains income inequalities between staff and top bosses, and businessline’s analysis of FY24 annual reports of the Nifty50 companies shows that this ratio ranges from 11 to 1702 for India’s 50 large companies.
In FY24, the CEO pay as a multiple of median remuneration of employees was the highest at Wipro with MD and CEO Thierry Delaporte’s pay 1,703 times that of employees. The second-highest ratio in FY24 was at Tech Mahindra at 1,383, primarily because top boss CP Gurnani’s pay of₹91.8 crore included his retirement benefits. Pharma major Divi’s Laboratories reported a ratio of 1,174 with MD Dr Murali K earning ₹64 crore that year. JSW Steel (875), HCL Tech (707), and Infosys (677) were the other companies in the list of top 10 CEO pay ratios. In eight of the top 10 cases, the CEO pay ratio in FY24 also saw a rise from FY23. Divi’s Lab and Hindalco saw a decline in the CEO pay multiples.
SBI Life Insurance (11), Shriram Finance (30), and Maruti Suzuki (33) are a few companies where the multiple was relatively lower.
Nifty50 includes six government companies that are exempt from this disclosure, and few entities with changes in MD/CEO during the year, where the ratio was not disclosed. Further, in case of Reliance, CMD Mukesh Ambani has not been taking salary for four years now.
CEO salary
“The CEO pay multiples have historically been large. This is because salary of median employees comprises fixed pay and bonus that see moderate annual increments, but performance-linked incentives and stock awards make up a significant part of CEO pay. This creates a greater fluctuation in CEO pay, depending on company performance, in contrast to fairly stable annual pay hikes for junior employees,” Monica Agrawal, MD - Financial Services, Asia Pacific & India Lead - Board Services, Korn Ferry, said.
C Vijayakumar of HCL Tech, Thierry Delaporte of Wipro, ITC’s Sanjeev Puri, Mahindra & Mahindra’s Anish Shah and L&T’s SN Subrahmanyan are the Nifty 50 CEOs with the biggest pay increases in FY24.
Wipro, Bajaj Finance, Tech Mahindra, Divi’s Lab, HCL Tech and JSW Steel are companies that reported highest MD/CEO remuneration in FY24.
IT service major
Four out of the top 10 companies with high CEO pay multiples are IT services majors.
Gaurav Vasu, founder and CEO of research firm UnearthInsight, explains that the pyramid structure of IT services firms is a likely reason. “CEOs of tech services firms work and live in the US/Europe closer to large clients while delivery teams are in a distributed offshore model. The responsibilities of tech services CEOs is multi-fold from being answerable to board, investors, employees, and global clients,” he adds.
Shriram Subramanian, founder, InGovern, says that these ratios get more attention in the US thanks to movements such as Occupy Wall Street but in India, neither shareholders nor employee unions track it closely. “However, institutional investors often insist that a large part of CEO be variable and linked to performance,” he adds.
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