CEOs in India earn 78 times the salary of an entry-level professional, says study

Date : Jan 29, 2014

Indian companies are likely to give more than 10 per cent pay hike to their top executives this year amid hopes of revival in economic growth and business prospects, says a study.

Global management consultancy Hay Group's study released on Monday said compensation of Chief Executive Officers (CEOs) and Managing Directors (MDs) are projected to increase by 10 per cent this year, higher than 9 per cent hike in 2013.

Top executives, a part of the senior management team, are set to see a 10.4 per cent increase in their pay, up from 9.5 per cent seen last year.

"This year, we see a return to double-digit pay increases for CEOs and their top teams, after a dip last year... The main reason for the trend is that companies expect a revival in economic growth post general elections," Sridhar Ganesan, Country Head for Hay Group India, said.

Despite a very conservative economic outlook, organisations believe that this year's general elections would give a spurt to their business prospects, he said.

Hay Group said CEOs in India earn "78 times the salary of an entry-level professional" and the ratio has been consistently on the rise.

According to Ganesan, external recruitment of CEOs has grown in both number and intensity.

"The spotlight falls on the need for robustness in the senior team's succession management processes, to make the internal talent pool relevant for leadership succession," he noted.

This pay ratio is higher for FMCG and real estate sectors, indicative of the CEO movements that have taken place in the last few years.

The study - 'Top Executive Compensation Report 2013-2014' - is based on an analysis of 2,524 jobs spread across 176 organisations. All information available till December 1, 2013 was analysed.

Interestingly, the study showed that CEO pay at Indian companies is less correlated to performance, since a large part is skewed towards guaranteed pay.

Such a trend is unlike mature markets, such as the US and Europe, where there is greater alignment of CEO pay to business performance and shareholders.

"In emerging economies, of which India is a part, such alignment is lacking. As result, a majority of the CEO's compensation is guaranteed, irrespective of the shareholder value created," Ganesan said

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