Executive Compensation: The Year of Cautious Optimism
The above chart represents compensation paid to CEOs
across different revenue groups. The compensation remains
fairly inelastic in the first two revenue ranges of `0-5 billion
and `5-10 billion. Also, it is interesting to note that at higher
revenue ranges representing larger organizations, the
difference in pay is attributable more to higher short-term
incentives and long-term incentives comparedto fixed
compensation. We see a much better progression on total
compensation as we move above the revenue range
`10 billion. This shows that the co-relation is improving
especially for large organizations. The regulatory disclosures
required by the Companies Act, 2013 will force the
remuneration committees to have a more structured
approach towards determining CEO compensation which
should improve these correlation numbers further in the
coming years.
The above chart represents the compensation paid to
CXOs across different revenue groups. We see that there
is some bit of clustering in the data patterns. Up to
`10 billion the total compensation at CXO level seems
to be quite inelastic in nature. At the next tier, we see
that while the fixed compensation broadly remains at
similar levels, the total pay is much higher on account
of differentiation created through short-term incentives
and long-term pay. We can call this the first inflection
point. At `35-50 billion revenue range, the total pay at
average level increases by approximately 33%. We again
see the clustering till `100-300 billion revenue range
where CXO pay remains inelastic to a large extent. Beyond
this level, again there is a quantum jump in the level of
compensation and the same increases by approximately
36% for revenue range greater than `300 billion.
2. Analysis Basis Industry
The below graph represents the compensation paid to
chief executives in India across different industries – while
on an average there is parity at the total compensation
levels, it is important to note that the financial services
does not include the compensation data of banking CEOs
which are very aggressive on long-term incentives. It is
interesting to see that while on fixed pay there is parity
across different industry clusters, the financial services are
at a much lower level. However, if we look at the quantum
of short-term incentives, it is much higher in financial
services compared to other industry clusters. Manufacturing
sector lags the pack with the lowest amount of pay linked
to short-term or long-term goals.
The following graph represents compensation paid to
CXOs across different industry clusters. Evidently, there is
not much differential in the compensation level across
different industry groups. The primary reason for that is
functional talent is getting much more mobile
across industry sectors.
3. Analysis by Ownership Type
The below graph represents the compensation paid to
chief executives in India across different ownership types -
It is evident that the "Pay at
Risk" is highest in financial
services followed by services
and FMCG/pharma
|