Piketty and Lucas Chancel show that income inequality in India, as measured by the share of total income, is at its highest point in nearly a hundred years. Praveen Chakravarty, Visiting Senior Fellow, IDFC Institute, tries to explain this issue in this Bloomberg Quint article through the MD-to-worker pay ratio in 20 companies; 15 from the private sector and 5 from the public sector. Excerpts below:
"The MDs of the 15 private sector companies received on average Rs 15 crore in cash salary in FY17 while those of the 5 public sector companies received just Rs 30 lakh. The average worker in the private companies earned Rs 11 lakh and those in the public sector companies, Rs 10 lakh. In the 15 private sector companies overall, the MDs are paid 140 times more than their average employee while in the public sector companies, the MD is paid just 3 times the average employee."
"In summary, private sector companies typically pay their MDs nearly 140 times more than their average worker or 300 times the median worker, regardless of profitability or stock price performance."
"The Securities and Exchange Board of India in 2014 mandated all public listed companies to disclose the ratio of the median pay of all employees to the pay of each director of the company. While this disclosure is welcome, it does not go far enough to prescribe a more transparent process to approve executive pay."
Read the full article here.