The issue has received little attention from shareholders in India.Infosys founder NR Narayana Murthy has previously indicated that a fair CEO remuneration would be about 25 to 40 times that of the lowest level employee. But in his own company now, CEO Salil Parekh’s compensation is nearly 700 times that of the median remuneration in the company (compared to that of the lowest level employee, it would be significantly more). And that figure has risen sharply since 2019.
Wipro has witnessed a substantial increase in the remuneration of the CEO compared to that of its employees. Former Wipro CEO Thierry Delaporte’s compensation was $20 million, which meant his salary was 1,702 times more than that of the median remuneration of Rs 9.8 lakh in the 2023-24 financial year.
Within a single year, the ratio between HCL CEO C Vijayakumar compensation and the median employee remuneration widened to 707 in 2023-24, from 253:1.
Accenture chief executive officer Julie Sweet’s compensation in the 2023 fiscal was $31.5 million, 633 times that of the median salary of an Accenture employee, which was $49,842. This median salary was actually lower than the $50,512 in the 2019 fiscal. A report by executive intelligence platform Equilar finds that the median S& (largest listed companies in the US) employee earned $81,467 in 2023, a 5.2% increase from 2022. Due to CEO pay increasing at a higher rate than the median employee, the CEO pay ratio increased from 185 in 2022 to 196 in 2023.
The report also noted that stock awards accounted for approximately 70% of total CEO compensation in 2023. The median value of stock awards increased by 10.7% to $9.4 million in 2023, significantly contributing to the overall rise in total compensation.
In India, disclosure of pay ratios was mandated by the Ministry of Corporate Affairs (MCA) in 2014. However, the regulations do not specify a computation methodology, allowing companies to use their own discretion in arriving at these numbers. Shriram Subramanian, founder and MD of proxy advisory firm InGovern Research Services, says that over the past 10-15 years, these IT services firms have become large global companies. “Hence talent at senior levels becomes benchmarked to global levels, thus ensuring compensation is also benchmarked to global levels and growing at a rate greater than the rate at which the company grows. However, since the number of entry level employees has increased significantly, the compensation at entry levels has not increased. This is the main reason why the pay ratio will keep increasing. Shareholders are more interested in CEO compensation being largely variable and linked to performance metrics.”
Subramanian also noted that the Occupy Wall Street movement in the US in 2008 saw the demand for disclosure of pay ratios. “In the US, labour unions and other organisations use this data for corrective bargaining. In India these numbers have not found significance or usefulness anywhere.”
Phil Fersht, chief executive officer of IT research and advisory HfS Research, says that leadership in IT services firms is increasingly becoming a critical differentiating factor, particularly at the CEO level and the CEO’s direct reports.