Why India Inc's CEOs Are Overpaid?

Bangalore: When Prime Minister Manmohan Singh asked to curb the CEO salary, it was opposed by many. But due to the global crisis many governments are pondering over the thought of putting a cap on the salaries of the senior executives. In a recent study done by Aon-Hewitt, an HR consultancy firm suggests that India has the widest gap between the salaries of the CEOs and the graduate fresher.

According to this study, the CEO’s in India receive compensation on an average of 675 times that of freshers. United States ranks second with 423 times difference and China ranks the lowest with the ratio of 268 times. Anandorup Ghose, Head, Aon-Hewitt, tells The Economic Times, “The inequality of compensation in India stands out dramatically among the countries we studied. Looks like we are the most capitalist country in the world, even more than the U.S.”

India will have deeper long-term implications on the pay gap as there are some good structural reasons why the compensation inequality in India is so high and have increased over the time.

The Global Executives and their Global Salaries

In India after the economic liberalization the corporate sector has grown and their global aspirations also have increased. The business groups such as the Bharti Group, the Tatas, the Birlas and many others are looking forward to hire the best leadership team in the world to give tough competition to other companies.

Inder Walia, HR group director, Bharti Group says, “At senior levels, we are very much scouting for talent at a global level. Top talent will demand top compensation.” To get such talent is not cheap and easy but still the Indian industries are trying hard to impress them and attract them with the hike in salaries. However, the high salary for the high executives is necessary.