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24 Feb, 2012

CEOs Now Making Incredible Money in Incredible India


New Delhi/Mumbai, February 22, 2012: Global management consultancy Hay Group released the Top Executives Compensation report today, revealing that the average CEO’s compensation in India has crossed the INR 2 crores / USD 400,000 mark, on a cost to company (CTC) basis.

The study also shows that compensation is pegged to be more than INR 7 crores / USD 1.4 million at larger, more complex organizations. For the next level of top executives (excluding the CEO), the average compensation is above INR 1 crore / USD 200,000, on a CTC basis.

The Top Executive Compensation Report 2011‐2012 features insights from about 87 organizations across sectors, analyzing compensation practices of top executives – CEOs, their direct reports, and heads of businesses as well as functions.

Sridhar Ganesan, Rewards Practice Leader, Hay Group India, comments, “The Indian CEO market has always seen a large pool of “operationally‐excellent” CEOs, but a constant scarcity of “managing‐ business” CEOs has driven compensation high. Compensation is expected to further spiral upwards owing to the increasing cross‐sector employability of CEOs – the new breed of “Lateral CEOs”.

Instances such as global cement major recruiting an Indian investment banker as the CEO of its India operations and head of Indian manufacturing company joining an IT company to lead its Manufacturing vertical, point to cross‐ sector movements. This broader landscape of opportunities, coupled with the scarcity of “holistic” CEOs, will drive executive compensation northwards.”

He further adds, “This also has implications on the next line of top executives – the average CEO’s salary is 2.6 times that of the rest of the executive population, in terms of total CTC, excluding long‐term incentives (LTIs). However, there is very little total compensation differential between top executives across core and enabler functional roles. Reward philosophy driving business accountability as a top “team” rather than a few stakeholders is here to stay”.

Another marked trend is the growing focus on performance, leading to a more pronounced variable pay component in overall compensation. The study finds variable pay as a percentage of fixed CTC to be in the range of 15% to 30%. The performance focus also leads to a growing trend of Long‐Term Incentives, for both CEO/MD levels as well as Other Executives, with stock options being the most prevalent vehicle.

Covering 87 organizations in India across the sectors of Chemicals, Basic Resources, Oil and Gas, FMCG, Retail, Construction and Materials, Industrial Goods and Transportation, the Top Executives Compensation Report is designed to enable organizations to understand prevailing compensation practices and trends, and assist them in formulating market‐aligned and business‐model affordable compensation to their Top Executives.

For more information, please visit www.haygroup.com/in