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Global management consultancy Hay Group released the Top Executives Compensation report, revealing that the average CEO’s compensation in India has crossed the INR 2 crores / USD 400,000 mark, on a ...

Global management consultancy Hay Group released the Top Executives Compensation report, 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.

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CEO's compensation Study Press Release Document Transcript

  • 1. News Release Scarcity of holistic CEOs to push CEO compensation north Trend of cross‐sector employability of CEOs coupled with scarcity of holistic CEOs to drive the war  for CEO talent    • CEO compensation at large, complex organizations has crossed the INR 7 crores mark  • Greater focus on linking performance to CEO compensation reflected in higher proportion of  short term variable pay and evolving prevalence of LTIs  • Benefits have been on a decline, with chemicals sector at 16% of CTC and transportation at  6% of CTC  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”. (Table 1)   Hay Group 1
  • 2. News Release Table 1  CEO salaries are 2.7 CEO salaries are 2.5 times that of Core times that of Business Business Roles Enabler Roles Core Business Roles CEOs Business Enablers Roles  Note: Core Roles (e.g. Head Sales & Marketing, Head of Manufacturing/ Operations, Business Heads etc) Enabler Roles (e.g. Head HR, Chief Information Officer, Head R&D etc)  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. (Details in Table 2)  Table 2  80%   68%   70% 61% Another  trend  60% is that benefits  50% have  been  on  40% 36% a  decline,  as  CEO/MD 30% 28% Other Executives organizations  20% are  looking  at  12% 11% 8% 7% cash  as  an  10% important  0% element  of  Stock Options Restricted  Performance  Other LTI Plans Stock Plans compensation.    (Details in Table 3) Hay Group 2
  • 3. News Release Table 3           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.   EndsNotes to editorsPlease note: these findings should be credited to ‘global management consultancy Hay Group’, and not ‘Hay’ or‘Hays’, which are separate and unrelated organisations.For further information:Miss Nidhi MehraM: + 9818331654E: nidhi.mehra@haygroup.comAbout Hay GroupHay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent,organise people to be more effective, and motivate them to perform at their best. With 85 offices in 49 countries,we work with over 7,000 clients across the world. Our clients are from the public and private sector, across everymajor industry, and represent diverse business challenges. Our focus is on making change happen and helpingorganisations realise their potential. For more information, please visit www.haygroup.com/inHay Group 3