Chief executive officers (CEOs) in top Indian companies appear to be beneficiaries rather than victims of the economic slowdown. Companies looking for top-notch CEOs who can negotiate the tough times in a slowdown are now ready to pay hefty compensation to get the right person. The annual compensation packages of members of this exclusive club go up to Rs 20 crore excluding stock options, according to data by Argus Partners, a recruitment agency specialising in board appointments.
Four to five years ago, the figure was roughly half and two years ago it was 30 per cent less. In contrast, multinational corporations (MNCs) s pay about 50-70 per cent less to their top CEOs in the same sector for a similar-sized company.
The hefty packages, however, are available only to an elite club, offered by big Indian corporate groups with turnovers between $3 billion and $10 billion. And, they are concentrated in resources industries, including energy, petroleum and metals, to name a few. In sectors such as fast-moving consumer goods, telecom, information technology or consumer goods, CEOs do not command such large salaries.
Insulated against slowdown
| Current average compensation for CEOs at some Indian firms |
| D Bhattacharya |
MD, Hindalco Inds.
Mar 2013 Rs 20.61cr
| K Venkataramanan |
MD & CEO, L&T
Mar 2013 Rs 14.28cr
| Braja K Mishra |
MD, Welspun Corp
Mar 2013 Rs 13.72cr
| Karl Slym |
MD, Tata Motors
Mar 2013 Rs 10.97cr
| Raymond N Bickson |
MD, Indian Hotels
Mar 2013 Rs 10.33cr
| Nitin Paranjpe |
MD & CEO, Hind. Unilever
Mar 2013 Rs 10.12cr
| Arun Sawhney |
MD & CEO, Ranbaxy Labs.
Dec 2012 Rs 9.72cr
| Antonio Helio Waszyk |
Chairman & MD, Nestle Ind
Mar 2013 Rs 9.47cr
| Himanshu Kapania |
MD ,Idea Cellular
Mar 2013 Rs 8.75cr
Says Nitin Gupta, chairman, Argus Partners: "Top salaries being paid by Indian companies are insulated against any slowdown. Indian companies pay much more than MNCs, because of the risks they take in terms of stability or working with promoters. MNCs also can't restructure salaries in India as that would impact their global compensation system."
The view is echoed by other top CEO recruiters.
Points out Anjali Bansal, managing director of Spencer Stuart India: "During a slowdown, companies are increasingly ready to pay the required globally benchmarked compensation for international talent that could help them tide over the period and provide continued growth in international markets. This is particularly true in the larger Indian companies."
The difference between Indian companies and MNCs is also because of the nature of business. Says a CEO of a top international recruitment agency dealing with top-level appointments: "The compensation is based on the nature and size of business. In an Indian company, the CEO is responsible for a large part of its turnover, profits and market capitalisation."
"And, he or she can change them dramatically. For most MNCs, India is still a small part of their overall business. The compensation is commensurate with the global business size."
That is just one part of the picture. Not all CEOs' compensation packages are insulated from the slowdown. For those in medium and small companies or in MNCs, the overall compensation has fallen by over 15 per cent.
Gupta says typically about 60 per cent of CEO compensation is in fixed salary and 40 per cent in variables linked to targets.
He says in India about 80 per cent of the increase in overall compensation has come from the variable part of salary in the past five years. Stock options and bonuses constitute as much as 50 per cent of a CEO's fixed salary and come over and above the normal compensation.
During the slowdown, the money that a CEO gets through variable pay has come down 30-40 per cent as most companies are not setting ambitious targets. This translates into a 12-16 per cent fall in overall compensation for a CEO.
And it is unlikely that he or she will get more from bonuses or stocks either.