Bengaluru: The average Indian CEO remuneration stood at Rs. 13.8 crore, up 40% from pre-COVID-19 levels, according to the Deloitte India Executive Performance and Rewards Survey 2024.
Compared to every third CEO in 2020, every second CEO had a target remuneration of more than Rs. 10 crore in 2024. The average compensation for CEOs who were also promoters or members of the promoter family is Rs.16.7 crore. The ratio of professional CEO compensation to promoter compensation has increased dramatically from 1.0 to 1.3 during the last four years.
Forty-five percent of the BSE 200 companies (excluding PSUs) had a CEO change in the previous five years, according to an analysis of such moves. Internal appointments account for six out of ten newly appointed CEOs. The final quartet of CEOs were recruited from outside.
Anandorup Ghose, Partner, CHRO Programme Leader, Deloitte India, said, “Promoter CEO compensation outpacing professional CEO compensation is primarily driven by two factors. Professional CEOs change more often than promoter CEOs due to the longer tenure of promoter CEOs at an aggregate. But it is also important to note that the range of promoter CEO compensation is very wide, and that affects the higher averages.”
Despite an increase in CEO salary, over 50% of target compensation is subject to pay-at-risk. Pay-at-risk for professional CEOs is significantly greater than for promotional CEOs, at 57%. A quarter of the target remuneration for professional CEOs is provided through long-term incentives, which are typically given through share-linked incentives for most corporations. Among all CXOs in India, COOs and CFOs continue to earn the largest compensation premiums. Nearly half of the target remuneration for these two roles is driven by long-term incentives, with 44% of it being at risk.
Most businesses utilise a comprehensive scorecard that combines financial and non-financial measures and targets to evaluate the performance of their CEOs and CXOs. CEO and CXO incentives, however, are still skewed towards financial company-level objectives in those scorecards. Additionally, businesses are moving away from discretion in compensation decisions and towards a more systematic approach to incentive payouts.
With respect to long-term incentives, the report mentions two broad trends:
The percentage of companies using share-based incentives continues to increase (75 percent in 2024 vs 63 percent in 2020).
The prevalence of stock options, or ESOPs, continues to decrease (49 percent of companies in 2024 vs 68 percent of companies in 2020).
“Large Indian companies with more mature and globally aligned compensation practices are pivoting towards Performance Shares and use of multiple incentive plans for different employee cohorts. Conversations in the boardroom have also shifted from the need for share-based payment to the return from these incentive structures to stakeholders.” added Anandorup Ghose.