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CEO salaries at 3-year high in FY22: Survey

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The Economic Times
22nd June, 2022 04:12 IST

India Inc. paid its CEOs an average compensation of Rs 11.2 crore in FY22, with median compensation at Rs 7.4 crore, the highest in three years. In FY21, the average CEO compensation was Rs 9.4 crore (Rs 6.4 crore median) while in FY20, the average compensation stood at Rs 9.8 crore (Rs 6.9 crore median), according to the 2022 Deloitte India Executive Remuneration Survey. This includes compensation for both promoter CEOs as well as professional CEOs and takes long-term incentives (LTIs) into account.

For professional CEOs, the average compensation stood at Rs 10 crore, with a median of Rs 7.4 crore. On average, more than half of the total compensation for CEOs is variable. The survey covered more than 470 companies across manufacturing, consumer products, IT, ITeS, services, life sciences and financial services sectors.

"Limited and highly sought-after talent pool, the talent that is highly fungible within and even across sectors, and continued gap to global pay levels contribute to the increase in executive pay," said Anubhav Gupta, partner, Deloitte. "At the same time, boards, promoters and shareholders are focusing on linking a larger part of the pay to performance."

According to the survey, in FY22, the average compensation for the CEOs was 2.7 times that of chief financial officers, 3.7 times that of business unit heads, and 4.1 times that of chief human resource officers and heads of sales, in terms of the total cost to company including long-term incentives.

Pay Package Linked to Co Performance
Chief operating officer (COO) positions, where prevalent, appeared closest to the CEO position; the average compensation of the CEOs was 2.4 times that of COOs. The compensation for CXOs has stayed mostly consistent through the last three years, with almost 40% of total pay being at risk.

The survey showed that for CEOs, about 84% of short-term incentives (STIs) are dependent on company performance. The corresponding number is about 50% at the CXO level. Almost 80% of companies prefer a target-based approach for determining short-term incentives. Stock options continue to be the most prevalent LTI instrument with 54% of companies using it, Gupta said, adding that the adoption of performance shares has been on the rise over the last few years with 16% of the companies handing out these.

Performance shares are usually granted at a discount or at face value. However, their vesting is contingent upon certain performance criteria. Other LTI instruments include restricted stock units (RSUs) with 26% of the companies surveyed using it, long-term performance cash (22%), stock appreciation rights (12%), and long-term deferred cash (3%). Around 86% of the companies have a vesting schedule of 3-4 years, the survey showed.

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