CEO compensation has now exceeded pre-pandemic levels and this is the first survey where average CEO total compensation has crossed the Rs 10 crore mark by 2022, according to Deloitte. India Executive Remuneration Survey. It added that the average CEO’s total compensation is Rs 7.4 crore.
“CXO compensation has also seen a jump from 2021 levels. COO (Chief Operating Officer), CFO (Chief Financial Officer) and business unit head are among the top paid CXO roles. In most roles, company size had a greater impact on pay levels than the sector in which the company operates,” the survey report said.
The study included findings on the quantum and composition of executive compensation in over 470 companies in India. The study uses a consistent definition of pay and outlook to value long-term incentives such as stock options. This makes the quantities comparable across different participants.
51 percent of pay is “at risk” or variable for CEOs with a strong performance linkage with increasing pay levels. Earnings from this component may be reduced to nil in case of poor share price and/or fundamental performance of the company.
“Forty-one percent of pay for CXOs is “at risk.” For CEOs, 25 percent of pay was in the form of long-term incentives (such as ESOPs). For CXOs, long-term incentives accounted for 20 percent of pay. Long-term For companies with an incentive plan of Rs, 91 per cent had a vesting period of three or more years,” according to the survey.
The average compensation of CXOs is over Rs 3 crore, with about 40 per cent of the total salary at risk. The CEO to CXO compensation ratio varies from 2.4 for the COO to 4.9 for the Chief Legal Officer. According to the survey report, apart from COOs, CFOs and business heads are the highest paid CXOs.
Despite an increasing share of pay as a long-term incentive, executive talent remains highly mobile across sectors and across all sectors: two out of five companies analyzed had at least one CEO change since 2016 . One in three new CEOs was hired externally in this period. Two out of every three external CEOs were in CXO level roles at the previous company.
For CEO, 84 per cent STI is dependent on the performance of the company. At the CXO level, this number is around 50 per cent. About 80 percent of companies prefer a goal-based approach to the determination of STIs. “We found that 60 per cent of companies use long-term incentives. ESOPs are the most prevalent type of LTI equipment used,” the report said.
The survey report said, “The past few years have been relatively volatile and therefore unpredictable due to several ‘one off’ events in India and globally. As the negative economic impact of COVID 19 subsided over time, However, the focus has shifted from just cost optimization to talent retention. As a result, CEO compensation has now exceeded pre-pandemic levels (among other consequences).
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