The average CEO compensation in the country has crossed the Rs 2-crore mark on a cost-to-company basis.
In a study by global management consultancy firm Hay Group on Top Executives Compensation, it was found that at larger and more complex organisations, the compensation exceeds Rs 7 crore.
For the next level of top executives (excluding the CEO), the compensation is above Rs 1 crore on a CTC basis. The Top Executive Compensation Report 2011-2012 is based on insights from 87 organisations across sectors, analysing compensation practices of top executives — CEOs, their direct reports, and heads of businesses as well as functions.
Mr Sridhar Ganesan, Rewards Practice Leader, Hay Group, says: “The Indian CEO market has always seen a large pool of ‘operationally-excellent’ CEOs, but a scarcity of ‘managing-business’ CEOs which has driven compensation high.”
Also, the compensation is expected to spiral further due to increasing cross-sector employability of CEOs called the ‘lateral CEOs.’ “A broader landscape of opportunities, coupled with the scarcity of ‘holistic’ CEOs, will drive executive compensation northwards,” he added.
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. But there is very little total compensation differential between top executives across core (head of sales and marketing, had of manufacturing, operations and business heads) and enabler functional roles (HR Head, Chief Information Officer, R&D Head).
There is also a 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 15-30 per cent.