In 3 years, Asia's executive pay to cross US levels

The salaries of top executives in emerging markets, especially India and China, are likely to surpass that of their counterparts in the US in the next three years, says a survey by human resources ( HR) consulting firm Mercer.

According to the report titled "Executive Remuneration Perspective", rapid growth, leadership shortages and inflation in countries such as India and China, have created record increases in executive pay.

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Talent is mobile across Asia and as a result is driving up pay in some sectors to levels that may prove unsustainable, the report says, adding that executive salaries in Asia are already higher than in the Europe.

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Last year, average executive salary in Asia surpassed the salary in Europe and is on track to surpass those in the US by 2013, the report says.

The average executive salary is increasing by 7 per cent across the Asia Pacific region, while in Europe and North America it is growing at approximately 2.5 to three per cent. With an annual increase rate higher than in the US, we expect Asian executive salaries to surpass those in the US within the next two to three years, the report says.

According to the report the main reason for the rise in executive salary in the emerging nations like India and China are inflation and shortage of talent. The contributing factors for the rapid rise in executive pay in the Asian region include continued strong growth in its industrial production and gross domestic product (GDP), accelerating inflation across the region, scarcity of executive talent and difficulty in filing executive positions, the report says.

Commenting on India the report said that the economy is back on the track of strong growth and this is placing considerable pressure on talent retention due to heightened talent mobility. At senior levels, pay has risen at a rate that was disproportionate to performance delivered, given the talent market dynamics. This imbalance will see some reining in by building in greater governance on how pay is delivered and linking a great portion of the pay to value delivered, the report says.

Companies should ensure that they keep a sufficient component of the pay as variable and flexible so that they only pay for measurable performance, so that the total remuneration levels are sustainable over time, Mercer said. The trend will continue this year, says the reports.

Global growth, regional hotspots and executive talent shortages are leading to a dramatic change - by region - in pay for performance and executive remuneration program design and governance, Mercer says. According to the report, China, India, Indonesia, Vietnam, the Philippines and Malaysia are among the countries poised to see rapid rise in executive pay.