Pay gap: Top executives earn 3000 times that of the median employee

Data released so far shows multiple instances where ratio to median employee pay has exceeded 1000 for 2017-18

At its highest, the gap between median and top executive pay translates into the latter earning 3150.69 rupees for every one rupee earned by his median employee.

And this is not a one-off.

There are at least seven top executives among listed companies who earn more than a thousand times the compensation of their median employees. The median employee falls in the middle of the compensation hierarchy. There are an equal number of employees who earn more, and an equal number whose pay is lower. Top executive compensation as a ratio of this individual’s pay provides a measure of the gap in compensation between the two.

The numbers are based on analysis of data from corporate-tracker Prime Database (nseinfobase.com). The seven executives identified for 2017-18 is based on the data of 2851 directors for whom information is available so far. It may well rise. There were 17 such individuals in 2016-17 shows data based on 5665 directors.

The gap at the very top of this ranking was actually higher in this larger sample, with the top executive earning over 25685 times the pay of the median employee.

The top companies in terms of this difference for 2017-18 include information technology, auto and engineering companies.

There are also no women in the top ten list of remuneration multiples for either year.

This would be in line with global research that suggests that the gender pay gap extends right to the very top.

A March 2015 Federal Reserve Bank of New York Staff Report (https://nyfed.org/1WmOlct ) entitled  ‘Gender and Dynamic Agency: Theory and Evidence on the Compensation of Top Executives’ noted that women top executives are not rewarded the same way as their male counterparts.

For example, men are rewarded with more than ten times what their female counterparts get for the same increase in firm value. Women are also more likely to be negatively impacted by bad firm performance.

“…female executives are more exposed to bad firm performance and less exposed to good  firm performance relative to male executives,” said authors Stefania Albanesi of the Federal Reserve Bank of New York, Claudia Olivetti from Boston University (and the National Bureau of Economic Research) and María José  Prados from the University of Southern California.

It also seems in line with the income inequality in the country.  

Lucas Chancel and Thomas Piketty from the Paris School of Economics in their discussion paper ‘Indian Income Inequality, 1922-2014: From British Raj to Billionaire Raj?’ noted that the top one per cent of income earners had 22% share of national income as of 2014, a multi-decade high. 

“According to our benchmark estimates, the share of national income accruing to the top 1% income earners is now at its highest level since the creation of the Indian Income tax in 1922,” said the authors in their October 2017 paper.

Are top executives paid too much?

Regulator requires disclosures on compensation

Companies provide ratio of top executive pay to that of median employee

Ratio stretches in excess of 3000 at its widest in 2017-18

This is based on data released so far

Full-data for the previous year had seen it rise up in excess of 25000