<p>Having authored salary reports for nearly three decades, IMA can state for a fact that the compensation for occupants at corner offices have kept pace with the rise in the complexity of the operating environment. It has also kept pace with hikes in the price of gold. For instance, in 2009, 10 grams of gold cost Rs 14,500 against a price of Rs 52,790 today. This amounts to a 3.7-fold surge over the time frame, or an annualised growth of 10.6%. The average salary for CEOs jumped 4.2 times in the same period, at a compounded annual growth rate of 11.7%. Consequently, one could assuredly observe that salaries have in fact beaten the pace of inflation by 100 basis points a year, assuming, as many do, that gold is a hedge against it. This increase could be explained by a more arduous work schedule, an extremely competitive environment and greater levels of compliance risks.</p><p>Our recently published Director’s Compensation report suggests that the average CEO pay in FY22, within the private sector, has been Rs 41.9 million. Salaries drop abruptly for CFOs and other executive directors where averages are placed at Rs 12.7 million and Rs 18.1 million respectively. Wages at Public Sector Undertakings are a fraction of those in the private sector, with the average at Rs 9.3 million for CEOs. CEO salaries in the 90<sup>th</sup> percentile exceed Rs 100 million for all listed private sector companies. In comparison, the figure for large cap companies is Rs 220 million (at the 90<sup>th</sup> percentile) and Rs 167 million at the 75<sup>th</sup> percentile.</p><p>Mean pay tends to be higher than the median (50<sup>th</sup> percentile) due to a handful of very large outliers. Another interesting observation, our research suggests, is that older generation companies – those set up before 1991 – pay much better than new age ones. Moreover, salaries have a strong correlation with company size. The larger ones both in terms of revenue or market capitalisation pay multiple times more than smaller ones. Contrary to perception, Indian-owned companies out-pay foreign multinationals in most cases. Interestingly, over the course of the past 2 years, variable pay has jumped in proportion to total pay, when compared with the previous 2-3 years. However, there is a difference in the degree of variability across positions. For instance, the average CEO receives 29% of total pay in variable form, whereas for CFOs, the ratio is at a much lower 14-17%. This is logical as the CEO is meant to be compensated primarily for business growth and, consequently, should be subject to the variability therein, whereas the CFO’s role is of a relatively growth-agnostic nature.</p><p>IT companies tend to pay much more at the CEO level and pharmaceutical firms at the CFO level. IT businesses frequently earn revenues denominated in dollars and have gained colossally on the grounds of an unusually high depreciation of the Indian rupee. Pharmaceuticals, on the other hand, have to contend with a lot of compliance and operating risk and is generally considered to be a highly regulated business. The higher CFO compensation in this sector perhaps reflects this reality.</p><p>Our report provides compensation structures including fixed and variable for top management that includes Chairmen, CEOs, Finance and other Executive Directors. A sector and size-based analysis is included so as to enable our clients to benchmark salaries of their senior management cadres, including Finance and other Executive Directors, within what they believe would constitute their peers, both in terms of industry and size.</p>
<p>Having authored salary reports for nearly three decades, IMA can state for a fact that the compensation for occupants at corner offices have kept pace with the rise in the complexity of the operating environment. It has also kept pace with hikes in the price of gold. For instance, in 2009, 10 grams of gold cost Rs 14,500 against a price of Rs 52,790 today. This amounts to a 3.7-fold surge over the time frame, or an annualised growth of 10.6%. The average salary for CEOs jumped 4.2 times in the same period, at a compounded annual growth rate of 11.7%. Consequently, one could assuredly observe that salaries have in fact beaten the pace of inflation by 100 basis points a year, assuming, as many do, that gold is a hedge against it. This increase could be explained by a more arduous work schedule, an extremely competitive environment and greater levels of compliance risks.</p><p>Our recently published Director’s Compensation report suggests that the average CEO pay in FY22, within the private sector, has been Rs 41.9 million. Salaries drop abruptly for CFOs and other executive directors where averages are placed at Rs 12.7 million and Rs 18.1 million respectively. Wages at Public Sector Undertakings are a fraction of those in the private sector, with the average at Rs 9.3 million for CEOs. CEO salaries in the 90<sup>th</sup> percentile exceed Rs 100 million for all listed private sector companies. In comparison, the figure for large cap companies is Rs 220 million (at the 90<sup>th</sup> percentile) and Rs 167 million at the 75<sup>th</sup> percentile.</p><p>Mean pay tends to be higher than the median (50<sup>th</sup> percentile) due to a handful of very large outliers. Another interesting observation, our research suggests, is that older generation companies – those set up before 1991 – pay much better than new age ones. Moreover, salaries have a strong correlation with company size. The larger ones both in terms of revenue or market capitalisation pay multiple times more than smaller ones. Contrary to perception, Indian-owned companies out-pay foreign multinationals in most cases. Interestingly, over the course of the past 2 years, variable pay has jumped in proportion to total pay, when compared with the previous 2-3 years. However, there is a difference in the degree of variability across positions. For instance, the average CEO receives 29% of total pay in variable form, whereas for CFOs, the ratio is at a much lower 14-17%. This is logical as the CEO is meant to be compensated primarily for business growth and, consequently, should be subject to the variability therein, whereas the CFO’s role is of a relatively growth-agnostic nature.</p><p>IT companies tend to pay much more at the CEO level and pharmaceutical firms at the CFO level. IT businesses frequently earn revenues denominated in dollars and have gained colossally on the grounds of an unusually high depreciation of the Indian rupee. Pharmaceuticals, on the other hand, have to contend with a lot of compliance and operating risk and is generally considered to be a highly regulated business. The higher CFO compensation in this sector perhaps reflects this reality.</p><p>Our report provides compensation structures including fixed and variable for top management that includes Chairmen, CEOs, Finance and other Executive Directors. A sector and size-based analysis is included so as to enable our clients to benchmark salaries of their senior management cadres, including Finance and other Executive Directors, within what they believe would constitute their peers, both in terms of industry and size.</p>
