India Inc.’s CEOs, CXOs and senior executives are expected to take home an average increment of 9.1 per cent in 2023, down from the 9.7 per cent given out in 2022, according to rewards firm Aon India’s 12 Annual Executive Rewards Survey 2022-23 released on Monday.
This increment is 0.8 per cent points lower than the 9.9 per cent average increment projected for employees for the same year. “The difference between CEO salary and employee salary was 1.5-2 per cent points before 2017. Over the last 5-6 years, that gap has reduced,” explained Pritish Gandhi, director and practice leader of the Executive Compensation and Governance Practice in India at Aon.
The average CEO compensation, however, has also shot up 21 per cent over the past four years to Rs 8.4 crore now, the study pointed out. While the Indian tech workforce has been gripped by a flurry of mass layoffs – both at Indian startups as well as global tech giants with India operations such as Google, Meta, Microsoft and Salesforce, it hasn’t led to a drastic reduction in the salaries of the C-Suite.
“The layoffs are definitely impacting CEOs and CXOs also. But we are not seeing a drastic reduction in their salaries. While top management salaries do include a component of pay-at-risk in the form of short-term and long-term incentives, it depends on what the risk is linked to. Today, the layoffs are more concentrated in the tech sector. Since they are driven by valuations, the layoffs are not impacting the CXO salaries much,” Gandhi added.
Pay-at-risk is the sum of variable pay or short-term incentives and long-term incentives. The study, which analysed data across 519 companies from more than 25 industries, showed that the pay-at-risk components in a CEO’s compensation has gone up to 60% from 50 per cent in 2015-16, but for CXOs it has only gone up from 40 to 42 per cent.
“Senior executives’ salary increases continue to focus on pay at risk, indicating the emphasis on rewarding executives for the value they bring to the organization. In a rapidly evolving, volatile business environment, organizations seek to adopt executive pay programs that drive the right behaviours, are cost effective and contribute to long-term business results. Organizations can therefore benefit from a data-driven approach to make better decisions regarding complex executive compensation issues while navigating business volatility,” said Nitin Sethi, CEO, Human Capital Solutions, India and South Asia at Aon.
For board and senior managerial positions, one in three organizations are also focusing on improving diversity levels. As part of an accelerated effort, boards are embedding environmental, social and governance (ESG) factors, diversity and succession metrics in the long-term and short-term goals for CEOs and executive leaders, the note accompanying the study findings said.
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