The document summarizes key findings from Hay Group's annual Top Executives Compensation Report 2012-2013. Some of the main points include: - Executive compensation in India is expected to rise moderately by 9% in the coming year. - Factors like markets, strategy, culture and ambitions are better indicators of executive pay than job level alone. - Companies place much higher value on the CEO role compared to other top executives, with CEOs paid 3-4x more in some industries. - Sectors with evolving business models and need for outside talent see higher pay differentials for CEOs. - Variable pay makes up 30-44% of total compensation for CEOs and

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Companies placing 3 times more rewards value on the CEO’s role
compared to top executive team
Executive Compensation cannot have a one-size-fits-all, corporate-governance driven approach
that acts as a straitjacket for CEO pay
 Executive compensation expected to rise moderately by 9 per cent in the coming year
 Markets, strategy, culture, and ambitions the four real drivers of modern-day CEO pay
 Increasing external recruitment of CEOs in evolving sectors such as Retail and Basic
Resources. “Ready-made CEOs” as the mantra for success also means higher compensation
and larger differentiation between CEOs’ and Top Executives’ pay
 30 to 44 per cent of the overall executive compensation mix comprises incentives – both
short - term and long – term
New Delhi/Mumbai, December 4, 2012: Hay Group, global management consultancy, today released the
annual Top Executives Compensation Report 2012-13, revealing that the compensation of CEOs and their
top executives is set to increase by a modest 9 per cent & 9.4 per cent respectively in the coming year.
This exhibits a dip from the double-digit growth witnessed in previous years.
The Top Executive Compensation Report 2012-2013 features insights from about 158 organizations across
the sectors of Auto, Chemicals, Basic Resources, Oil and Gas, FMCG, Retail, Construction and Materials,
Telecommunication, Utilities, Industrial Goods, and Transportation. It is designed to enable organizations
to understand prevailing compensation practices and trends in India.
Sridhar Ganesan, Rewards Practice Leader, Hay Group India explains, “Hay Group research has found
that markets, strategy, culture, and ambitions are the four real drivers of modern-day executive
compensation. This is important to keep in mind as data analytics on executive compensation have to be
interpreted beyond just the stated numbers”.
Statistical analysis between the Hay Level (proxy for job contour in terms of scope, scale, size, complexity,
etc.) and Total Cost to Company (CTC) found a co-relation of 0.26 – indicating that other factors, besides
just the organization’s contour affect CEO compensation.
Sridhar qualifies, “CEO pay can be contextualized into 4 potential context clusters – the Carers, the
Contractors, the Cultivators, and the Fundamentalists. The Carers are companies that operate in an
environment of social capitalism, while the Contractors have a clear focus on extracting business value
from contracts and terminating them in case of failure. On the other hand, the Cultivators have the ability
to spin a compelling story and inspiring investors and employees with their energy to take risks, while the
Fundamentalists believe in an environment of continuous innovation without compromising on the
company’s identity and cultural strengths.
Adding further, he said, “Tata Group’s approach is of a Carer – where the organization uses social and
environmental consciousness to create a powerful employee and customer brand – thus the CEO pay will
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reflect the organization’s long-term ideals. On the other hand, current CEOs of online portals such as
Flipkart and Jabong mark the Cultivator approach, reflecting dynamism and highly leveraged payout
norms.” The four approaches are explained further in Table 1.
Table 1: Modern-day approaches to executive compensation
The Carers “Company exists to boost the community and the economy”
The Contractors “I know the individual who can”
The Cultivators “Go big or go home”
The Fundamentalists “Grow the new in the presence of the old”
The report also finds companies placing a much higher value on the role of the CEO for achieving overall
business results as compared to the top management team – CEOs are paid 3 times more than all other
senior executives. This multiplier goes up to more than 4 in industries such as Basic Resources and Retail,
while it falls below the average in industries such as Transport and Logistics, and Construction and
Materials, as showed in Tables 2 and 3.
Tables 2 and 3
CEO vs. Other Executive Positions
4.6 4.4
5.0
3.0 3.3 3.1
2.6 2.8 2.8
2.0 2.0 2.0
Sridhar Ganesan, Rewards Practice Leader, Hay Group India analyzes, “Impatience for business results
has lead to recruitment of ‘Ready-made CEOs’ and is one of the reasons for variance in the compensation
multiplier across sectors. Sectors with a high multiplier, such as retail, are still evolving in terms of
business model and readily-available talent – so external recruitment of CEOs has become very prevalent.
These CEOs who are recruited externally at current market rates and realities will drive the multiplier up
vis-à-vis internally grown incumbents. These sectors are looking at “Ready-made CEOs” as the mantra for
success.”
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Another striking feature of the findings is the deep-rooted preference for leveraged pay or pay for
performance in the overall compensation philosophy – for the top team executives including the CEO. 30
to 44 per cent of the overall compensation mix, for the CEO and the top team, comprises incentives.
Corporate India is addressing salary increases by moving higher parts of the increments into pay for
performance.
The report also finds variable pay, as a percentage of CTC (excluding Long-Term Incentives or LTI), to be
the highest in the Retail sector at 29 per cent, followed by Utilities at 26 per cent. This is depicted in Table
4.
Table 4
Utilities 26%
Transportation and Logistics 20%
Telecommunications 25%
Retail 29%
Oil & Gas 24%
Industrial Goods 19%
FMCG 22%
Diversified 24%
Construction & Materials 19%
Chemicals 17%
Basic Resources 20%
Auto 22%
0% 5% 10% 15% 20% 25% 30%
CEO-Variable Pay as percentage of CTC (without LTI)
Covering 158 organizations in India across the sectors of Auto, Chemicals, Basic Resources, Oil and Gas,
FMCG, Retail, Construction and Materials, Telecommunication, Utilities, 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.
The levelling of roles in this report has been underpinned by the Hay Group work measurement
methodology, which enables robust comparison and deeper insights.
Ends
Notes to editors
Please note: these findings should be credited to ‘global management consultancy Hay Group’, and not ‘Hay’ or
‘Hays’, which are separate and unrelated organizations.
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For further information:
Miss Nidhi Mehra
M: + 91 9818331654
E: nidhi.mehra@haygroup.com
About Hay Group
Hay 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 every
major industry, and represent diverse business challenges. Our focus is on making change happen and helping
organisations realise their potential. For more information, please visit www.haygroup.com/in
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