Executive Compensation in India

HANDBOOK ON EXECUTIVE COMPNSATION, Randall Thomas and Jennifer Hill, eds., Edgar Elgar

55 Pages Posted: 28 Sep 2011 Last revised: 27 Oct 2011

See all articles by Rajesh Chakrabarti

Rajesh Chakrabarti

O. P. Jindal Global University

Krishnamurthy Subramanian

Indian School of Business (ISB), Hyderabad

Pradeep K. Yadav

University of Oklahoma Price College of Business

Yesha Yadav

Vanderbilt University - Law School

Date Written: September 28, 2011

Abstract

We present an introductory regulatory and empirical analysis of executive compensation in listed companies in India.Our descriptive overview of levels and trends leads to several interesting conclusions. First, executive pay in the echelon representing the largest firms is several times greater than in smaller firms. It also includes a much greater component of variable pay, is much more sensitive to stock market movements, and exhibits much greater dispersion both across time and across firms. For this echelon of the largest firms, the features of executive pay are not qualitatively different from those documented for the US by Frydman and Saks (2010). However, for even upto the 75th percentile firm by size, there is little variable component in executive pay. CEO pay is considerably greater than the pay other executive directors (i.e., CXOs), and the ratio of CEO to CXO pay also displays high dispersion both across time and across firms. CXO pay displays a much lower variable component and much lower sensitivity to stock market movements, and hence a much lower variation across time. The real values of both CEO and CXO compensation have been following a sharply increasing trend in recent years in India.

Second, CEO and CXO pay is considerably higher (about 30% for both CEOs and CXOs) for firms that are part of business groups, and increase significantly with the proportion of promoters’ equity. These results are qualitatively similar to the inferences that currently exist in the literature for the impact of vertical agency costs on executive pay.Questions must now be asked to better assure that international standards implemented in India are tailored and fit for the specific risks generated, such that disclosure, corporate oversight, and say-on-pay, are meaningful and fulfill the intended regulatory rationales.

Keywords: Executive compensation, India

JEL Classification: J33, O53

Suggested Citation

Chakrabarti, Rajesh and Subramanian, Krishnamurthy and Yadav, Pradeep K. and Yadav, Yesha, Executive Compensation in India (September 28, 2011). HANDBOOK ON EXECUTIVE COMPNSATION, Randall Thomas and Jennifer Hill, eds., Edgar Elgar, Available at SSRN: https://ssrn.com/abstract=1934923

Rajesh Chakrabarti (Contact Author)

O. P. Jindal Global University ( email )

Sonepat Narela road
Sonepat
Sonepat, Haryana 131001
India

Krishnamurthy Subramanian

Indian School of Business (ISB), Hyderabad ( email )

Hyderabad, Gachibowli 500 019
India

Pradeep K. Yadav

University of Oklahoma Price College of Business ( email )

307 W.Brooks, Room 205A Division of Finance
Norman, OK 73019
United States
4053256640 (Phone)
4053255491 (Fax)

HOME PAGE: http://www.ou.edu/price/finance/faculty/pradeep_yadav.html

Yesha Yadav

Vanderbilt University - Law School ( email )

131 21st Avenue South
Nashville, TN 37203-1181
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
919
Abstract Views
4,701
rank
31,778
PlumX Metrics