CEOs see average pay rise by 7% in FY20

Professional CEOs got a raise in 2019-20 even as average salaries of their promoter counterparts dropped due to the economic slowdown before the pandemic struck. However, promoter CEOs, on an average, took home a 62% higher compensation than their professional counterparts.According to the ‘million-dollar CEO club’ study by EMA Partners, commissioned by TOI, the average salaries of professional CEOs rose 6.5% to Rs 13 crore in 2019-20 and that of their promoter counterparts declined by about 9% to Rs 21 crore. The study is based on a sample of BSE 200 companies and it does not include stock options. Since the study takes into account compensation details in balance sheets of companies for 2019-20, it excludes the trends that may have shaped CXO (including CFO) compensation following the Covid pandemic.The number of CXOs earning a million dollars (Rs 7 crore*) has inched up to 150 from 146 last year. The club is led by the Marans (Kalanithi Maran and Kavery Kalanithi) with a compensation of Rs 87.5 crore, which has remained unchanged (see graphic). 79454378Of the total, 81 are professional CEOs and 69 are promoters. Overall professional compensation has increased by 1.5%, while promoter compensation has risen by nearly 3%.EMA Partners India MD K Sudarshan said, “The trend over the last 12 months indicates that promoter CEOs have indeed taken a larger hit on their compensation notwithstanding potential dividend earnings out of their businesses as shareholders. On the other hand, we have seen an increase in the overall compensation for professional CEOs. We believe this anomaly will see a gradual correction as more professionals step up and increase their compensation driven by business performance.”Compensation of promoters like Sajjan Jindal of JSW plunged by nearly 44% to Rs 39 crore in 2019-20. The compensation of Murali Divi of Divi’s Laboratories has dropped by about 12% to Rs 52 crore, while that of H M Bangur of Shree Cement has gone down by about 10% to Rs 42 crore in 2019-20. However, Rajiv Bajaj of Bajaj Auto saw an over 23% jump in his compensation to nearly Rs 40 crore. Among professional CEOs, compensation of Hindalco MD Satish Pai rose 11% during the year to Rs 32 crore. Hindustan Unilever CMD Sanjiv Mehta’s salary rose about 24% to over Rs 16 crore. The remuneration of Rs 48 crore paid to Rohit Philip, who resigned from the post of CFO at IndiGo’s parent InterGlobe Aviation effective from September 15, 2019, however, includes the exit amount under his contract, which is why Philip’s compensation has more than trebled, catapulting him to the top 10 this year.Kansai Nerolac Paints VC & MD H M Bharuka said, “If India has to grow, the number of million-dollar CXOs has to increase considerably, which I am sure will come as corporatisation goes up.” Bharuka, who is also part of the club, said incentives are commensurate with the size, scale, complexities, spread and responsibilities. “The scrutiny, responsibilities and stress which a modern-day CXO faces have been going up. Digitalisation, fast-changing regulations, a number of compliances and new-age social media have put tremendous pressure on the CXO. He/she needs to continuously evaluate the impact of the global economy, climate change & the geopolitical confrontation on his company and accordingly adjust the strategy. While there are teams to handle specific roles, the buck stops at the CXO’s desk. Ultimately, he/she is answerable to stakeholders.”The gap between the average salaries of promoter (Rs 23 crore in FY19) and professional CEOs (Rs 12 crore, also FY19), which was nearly double, has reduced to 62% in FY20. Bharuka said there is no difference in the role of professional and promoter CEOs in terms of responsibilities. Therefore, compensation of a promoter CEO in comparison to a professional CEO should not be very high just because of ownership, he added. “Some of the promoters have a tendency to reward themselves much more, which raises debates in society about CXO compensation. There is a need for proper equilibrium,” said Bharuka.Sudarshan said fixed compensation will have limitations and a large component of CXO compensation will be subject to overall value creation. The quantum of stock-related compensation has been substantial in many cases. “In a growth environment, compensation will continue to go north and be well justified. However, compensation does come under severe scrutiny during such times when business growth is muted. It is hence important for the CXOs to set the right example for the rest of the organisation,” said Sudarshan.For the study, the Indian rupee to US dollar conversion has been taken at Rs 70.

from Economic Times https://ift.tt/2V8aO24