India’s average CEO pay hit a three-year high in FY22 at 11.2 crore and median at Rs 7.4 crore, according to a Deloitte India executive pay survey. The survey includes compensation for promoter CEOs as well as professional CEOs and considers long-term incentives, and covers more than 470 companies in manufacturing, consumer products, IT, IT services, life sciences and finance.
In FY21, the average CEO salary was Rs 9.4 crore and the median was Rs 6.4 crore, which was slightly subdued compared to 2020 when the average salary with long-term incentives term was Rs 9.8 crore and the median was Rs 6.9 crore.
In FY22, professional CEOs earned an average of Rs 10 crore, while the median compensation plus long-term incentives was Rs 7.4 crore. Similarly, in FY21, the average was Rs 9.1 crore while the median was Rs 6.2 crore, which was again below 2020 when the average was Rs 9, Rs 7 crore and the median of Rs 7.1 crore.
About 51% of CEO compensation is “at risk” or variable. Earnings from this component could drop to zero in the event of weak stock price and/or fundamental company performance. Nearly 25% of CEO compensation was in the form of long-term incentives.
In addition, the average CXO compensation in FY22 was Rs 3.2 crore, with almost 40% of total compensation at risk and long-term incentives comprising 20% of compensation. The median salary was Rs 2.4 crore, which has remained stagnant at this level for the past two years. In FY21, the average CXO salary was `3 crore and in 2020 it was Rs 3.5 crore.
CEO-CXO pay ratios vary between 2.4 for the COO and 4.9 for the Chief Legal Officer. Besides COOs, CFOs and CEOs are the highest paid CXOs, the survey points out.
For the CEO, 84% of short-term incentives depend on company performance. The corresponding number is around 50% at the CXO level. Nearly 80% of companies prefer a goal-based approach to determining short-term incentives. While 60% of companies use long-term incentives, ESOPs continue to be the most common type of long-term incentive instrument.
In most roles, company size has a greater influence on compensation levels than the industry in which the company operates. The increase in remuneration levels is accompanied by a strong link with performance. For companies with a long-term incentive plan, 91% had a vesting period of three years or more, he said.
“The past few years have been relatively volatile and therefore unpredictable due to multiple ‘one-off’ events, both in India and globally. As the negative economic impact of Covid-19 has lessened over time, the focus has largely shifted from cost optimization alone to talent retention,” Deloitte said in a statement.
Turnover at the senior management level is high, as despite an increasing share of compensation in the form of long-term incentives, executive talent continues to be highly mobile within and between sectors. According to the survey, two of the five companies analyzed have had at least one change of CEO since 2016. One in three new CEOs during this period was hired externally, and out of three CEOs hired externally, two held a CXO position in the previous company.