CEOs in India are earning about two times more than their top management team, including their senior-most counterparts in the human resources function.
Hay Group’s annual report on executive compensation in the country found that CEOs are earning 1.9 times their top executives in business core roles, that include heads of sales and marketing, manufacturing, and business heads.
This went up to 2.1 times when compared with what top executives in business enabler roles, such as the heads of HR, R&D, or the chief information officer, are earning.
Hemant Upadhyay, managing consultant and leader of Hay Group India’s executive rewards practice, noted that the pay differential between executives across core and enabler functional roles has reduced in the past few years, indicating that the organisation considers both roles to be important stakeholders in business performance.
“In organisations where HR plays a proactive role in shaping business direction, the compensation is at par with core roles.”
However, both CEOs and their top teams can look forward to pay hikes greater than 10% in this year. Compensation of CEOs is expected to rise by 10.2% this year, relatively stable in comparison to the actual pay rises of 10% witnessed in 2013-14.
Top executives are also set to see a 10.5% pay increase, up from 10.4% last year. Upadhyay attributed this to a positive economic outlook, where organisations believe the stable government will likely boost their business prospects.
“From an overall perspective, India’s top management compensation mix continues to be more driven by fixed pay, in comparison to other Asian, European and American economies,” he noted.
Benefits are becoming an increasingly smaller component of this pay mix, found the report, as organisations are moving towards cash-based structures, falling from 14% of the total compensation in 2013-14 to about 9% this year.
Performance-linked incentive plans, on the other hand, are gaining importance, with short-term incentives expected to make up about 27% of total CEO compensation.
For the long-term, stock options continue to be the most prevalent vehicle at about 57%, followed by performance shares (36%).
“This implies that there is direct alignment between the goals of the company and the compensation plan, as well as the top executive compensation is commensurate with the contribution/ impact of the role,” noted the report.