4045 times is the highest CEO pay ratio in India Inc for FY19

The income gap between top executives and regular employees remains wide in corporate India even as the continuing economic slowdown has left many companies across industries from automobiles to textiles bleeding.

Last fiscal, average annual remuneration of a CEO of a Nifty 50 company stood at 249 times more than the median remuneration of the company’s employees, according to data from nseinfobase.com

The company that reported the highest pay gap between CEO and an average employee is HEG, India’s leading graphite electrode manufacturer, where the CEO earned 4,045 times the median remuneration of its employees. Close on heels, the managing director of TCNS Clothing earned 3,383 times the median employee remuneration.

To be sure, the remuneration of CEOs of these companies have an element of exceptionality to them.

The remuneration of HEG chief executive includes commission of 2.5% of net profit, which grew 175% in FY19. An HEG spokesperson said CEO’s commission is below the 10% limit of net profit allowed under the Companies Act to be paid as managerial remuneration. The fixed component (basic salary) of the CEO has remained fixed since FY15, the person said. HEG had reported net profit of Rs 3,026 crore for FY19, but for the first six months of FY20 it slipped to Rs 413 crore. The company stock fell 35% during FY19 after rising 14-fold in the preceding fiscal year.

In case of TCNS Clothing, the CEO remuneration includes one-off items of value of ESOPs exercised during the year. According to the company’s spokesperson, excluding the perquisite value of exercised ESOPs, the ratio of MD remuneration to median salary would be about 130.

The top ten companies on basis of the CEO pay ratio are dominated by manufacturing companies. Manappuram Finance is the only exception. The stocks of only two of the ten companies – Divi’s Laboratories and TCNS Clothing – outperformed the benchmark index in FY19. Three companies in the list – Hero MotoCorp, Dilip Buildcon and Shree Cement — posted decline in net profit for FY19.

The pay gap between CXOs and regular employees in India is comparatively higher. The average CEO pay in the US is estimated at 271 times more than the nearly $58,000 annual average pay of the typical worker while average pay of CEOs of FTSE 100 companies is 144 times higher than the UK median pay of 24,000 pounds for all workers.