Senior executives are likely to get an average salary hike of 9.1 percent in 2023, slightly lower than the 9.7 percent increase the previous year, according to a new study released by financial services firm Aon on Monday, January 30. However, Aon India’s 12th Executive Rewards Survey 2022-23 points out that the salary structure of top executives in the country is becoming more like that in the US, with increasing share of performance-based pay in their remuneration.
Within the pay mix i.e. the sum of fixed pay, variable pay and long-term incentive (LTI) of a chief executive officer, LTI’s share is expected to increase to 40 percent of total compensation in 2022-2023 from 26 percent in 2015-16, said the survey. In the US, LTI accounts for 64 percent of the total compensation, it said.
According to the Aon survey, the average CEO compensation in India is Rs 8.4 crore, an increase of 21 percent in the last four years. It added that the average LTI amount for CEOs for BSE Sensex organisations is Rs 10 crore and among other CXO roles of BSE 100 companies, the chief financial officer is the highest paid. Also, the LTI component of pay is rising far more quickly than the fixed component for CEOs across India Inc.
The Aon study found that among BSE top 30 companies, LTI is provided at 176 percent of fixed pay for CEOs and at 103 percent for other C-suite executives, including the chief operating officer, chief financial officer, sales leader and chief human resources officer. The average LTI amount for CEOs for the same set of organisations is Rs 10 crore.
Nitin Sethi, Chief Executive Officer, Human Capital Solutions, India and South Asia at Aon, said, “Senior executives’ salary increases continue to focus on pay at risk, indicating the emphasis on rewarding executives for the value they bring to the organisation. In a volatile business environment, firms are seeking to adopt executive pay programmes that drive the right behaviours, are cost-effective and contribute to long-term business results.”
He felt organisations can benefit from a data-driven approach to make better decisions regarding complex executive compensation issues while navigating business volatility.
The survey also said for board and senior managerial positions, one in three organisations are focusing on improving diversity levels.
Gandhi said, “With rising shareholder activism, pay governance has become a key focus area for India Inc. As a result, organisations are updating their Malus clauses that are additional checks before vesting of long-term executive incentives – particularly in cases of material financial restatement.”
He added that claw back clauses that allow companies to retrieve past pay-outs under exigent circumstances of fraud and misconduct are also being applied for a duration of 3-5 years, as organisations design their 2023 executive compensation programmes.
Aon’s survey analysed data across 519 companies from more than 25 industries for the study.
