Indian IT CEO-employee pay gap widens

BENGALURU: The ratio of CEO pay to median remuneration of employees (MRE) for the top three Indian IT firms widened in 2018-19 because CEO compensation increased sharply while employee salary increments were modest.

Wipro CEO Abidali Neemuchwala was paid 455 times more than the median remuneration of employees (MRE) in the Bengaluru-based firm. This is up from 337 in the previous year. The differential in Wipro is particularly high because Neemuchwala is based in the US.

TCS CEO Rajesh Gopinathan’s pay to MRE ratio was 262 in 2018-19, compared to 211 in the year before. Infosys CEO Salil Parekh’s pay to MRE ratio was 396. This ratio in Infosys in the year before was 273 (Parekh joined the company in January 2018).

The trend seems to be in contrast to what’s happening elsewhere. US compensation research firm Equilar said that based on data in May on Russell 3000 companies, the market-capitalization weighted equity index, it found that CEO pay for tech companies changed at roughly the same pace as pay for median employees. Median CEO pay decreased by 0.58%, while median employee pay decreased by 0.51%.

Phil Fersht, CEO of IT consulting firm HfS Research, said that for most IT services firms, the remuneration always tends to be higher when the candidate is hired externally than internally (Neemuchwala and Parekh were external hires). “However, with the need for leadership and focus higher than ever, I expect the CEO pay to increase at a faster pace than previously,” he said.

Neemuchwala’s compensation in 2018-19 increased as much as 41% to $3.95 million (Rs 28 crore), compared to $2.8 million previously, according to a filing with the SEC. In comparison, MRE, excluding whole-time directors, was Rs 6 lakh and Rs 5.4 lakh in 2018-19 and 2017-18, an increase of 11%. In 2017-18, the increase in MRE was a mere 3.25%. In TCS, MRE increased by 3.7% in the last financial year, better than the 0.5% in the year before. Gopinathan’s compensation (excluding stock options) rose 29% to Rs 16 crore in 2018-19.

Parekh took home Rs 24.7 crore in the last financial year. Infosys’s MRE was up 4% last year, lower than the 6% in the year before.

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