MUMBAI: Captains of India Inc. took home about 16% more in average salary last year, even as corporate earnings remained tepid, as companies sought to retain their managing directors and chief executive officers to steer them through a difficult business environment.That was higher than the 9-9.5% average industry salary increase, sparking concerns over the wide pay gap between those at the helm and other employees.“People want to hold on to good talent in an uncertain business climate. If there is continuity, it makes sense,” said Harsh Goenka, chairman of the RPG Group, citing the volatile scenario in India and globally as a possible reason for CEOs bagging more increases than the average. “There is also a dearth of talent at the top, which could be one of the factors.”The average pay of MDs and CEOs of companies in FY19 was Rs 6.39 crore compared with Rs 5.53 crore in FY18 and Rs 4.49 crore in FY17, according to an ET analysis of CEO salaries, excluding promoters. The data is based on the published annual reports of 90 BSE500 companies, including sector front liners such as ITC, Larsen & Toubro, Axis Bank, HDFC Bank, HDFC Life Insurance, Tata Consultancy Services, Tata Steel and GlaxoSmithKline Pharmaceuticals.A total of Rs 549.41 crore was paid to 90 CEOs and MDs in FY19 compared with Rs 475.62 crore a year earlier. The amount includes basic pay, perquisites, variable pay and commissions, excluding stock options.70867959 Multiple Factors at Play“The nomination and remuneration committees are extremely conscious about rewarding people in terms of pay for performance. What we are trying to bring in is to link up the pay and reward not just to one single-year performance but for an entire cycle to make the person more accountable,” said Shailesh Haribhakti, chairman of audit and accounting company Haribhakti & Co.Going by Aon’s annual Salary Increase Survey in India published this year, India Inc. employees got an average salary hike of 9.5% in 2018 and can expect a 9.7% increase this year.“We are trying to reduce the gap and are conscientious about not just the top guy but the whole team being rewarded,” said Haribhakti, an independent director in many Indian companies.Anurag Malik, partner, people advisory services at EY, was of the view that CEO/MD salaries should be compared with those of others after removing the impact of variable pay and the value of stock options. “These typically form a much larger proportion at the CEO/MD level,” he said, adding that “one also needs to check what percentage of this was on account of renegotiation of contracts, as the typically year-on-year growth in CEO/MD salary is relatively lower.”HR viewHuman resource consultants and search industry experts said there could be multiple factors at play, including demand-supply of leadership executives, indispensability of current leadership to meet business goals and vulnerability of companies losing their top executives, in addition to performance, roles and responsibilities.“I don’t see any reprieve in the CEO compensation,” said R Suresh, founder of boutique executive search firm Insist. “The CEO takes responsibility of the entire company to make it function effectively and will not fall even in a recessionary market.”In difficult economic environments, companies would want to retain their high-performing CEOs who get more job offers than others. “Even in an absolute bad market, I am not sure if CEO compensation will drop,” said K Sudarshan, managing partner at EMA Partners India. “It is also a function of demand and supply. You cannot hire high-performing CEOs at lower cost.”Experts said there are no fixed norms for CEO salaries and the rules can’t be the same for employees at other levels. Salary renegotiations can take place every year, depending on a company’s requirements and the business environment.“CEO is like a medicine for a company and no company ever thinks of cutting the CEO package,” said Suresh.Salaries of CEOs are relatively more linked to company performance than the remuneration paid to other whitecollar employees, which is more a factor of market trends and a company’s capacity to pay, compensation experts said.
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