India Inc's top honchos are likely to get a 6 per cent salary hike in 2021, with the pandemic affecting executive salaries less significantly than the global financial crisis of 2008-09, according to a study by global professional services firm Aon.
"At 6 per cent, the 2021 projected salary increase for senior executives is down by 1.4 per cent from 2020. The COVID-19 pandemic had less of an impact than the 2008-2009 Global Financial Crisis, when projected salary increases for senior executives dropped by almost 5 per cent," said Nitin Sethi, partner and CEO of Aon's performance and rewards business in India.
Aon's 10th Annual Executive Reward Survey in India, conducted among 504 companies from more than 20 industries, said the median CEO compensation, excluding long-term incentives (LTI), for owner-promoter CEOs is Rs 15 crore. The figure is Rs 12.92 crore for a Sensex CEO, while the median compensation is Rs 3.63 crore for CEOs at Indian private firms.
"The pandemic has not been so severe on executive increments. In the global financial crisis, we had many sectors that were badly hit, but in this crisis, we have many sectors like IT/ITeS, consumer goods and pharmaceuticals which are continuing to do well. So, executive salaries of these sectors have seen heavy increments," said Aon's chief commercial officer (India & South) Roopank Chaudhary.
The variable pay component is the most affected for top executives due to the COVID-19 pandemic, with pay-outs for executives who had a "Meets Expectations" performance rating projected to drop from 95 per cent in 2019-2020 to 85 per cent in 2020-2021.
The sum of variable pay and LTI as a percentage of total compensation is around 50 per cent for CEOs in India compared to 87 per cent for CEOs in the US.
"Executive pay practices in India are catching-up with those of US and European companies. Over half of Total Compensation for CEOs in India today is linked with business performance. Performance Shares and Restricted Stock Options are becoming more prevalent, as more companies are moving away from basic Stock Options," said Ray Everett, CEO of Aon's human capital & rewards solutions across Asia Pacific, Middle East & Africa.
We are seeing more alignment towards pay for performance in Indian executives as well compared to the previous year, Chaudhary said.
Apart from CEOs, the highest-paid executives in 2020-21 are the chief operating officer and chief financial officer, followed by the sales head and chief human resources officer. The head of legal and head of IT are among the lowest-paid executives. Strategy and finance continue to be the top remunerative functions for executives. The survey data also shows that financial institutions and the fast moving consumer goods (FMCG) sectors continue to lead in India on executive pay.