Bombay : The salaries of Indian CEOs and other senior corporate executives are set to rise the fastest in five years amid a shortage of people to fill these positions, a shortage that is also driving up the salaries of those they lead.
Compensation for India Inc.’s CXOs is expected to increase by 8.9% in 2022, from 7.9% the previous year, according to the 2022 Executive Rewards survey by human resource consultancy Aon India, which analyzed 475 companies in 20 sectors. The findings were released Wednesday.
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“There is a talent shortage at the CXO level, and companies have realized that to get high-quality talent, they have to pay more. Previously, the gaps in raise between CXOs and junior and middle managers were significant , but now they’ve shrunk,” Nitin Sethi, partner and CEO India for human capital solutions at Aon, told Mint. In February, Aon estimated that the India-wide average wage increase would be 9.9% as companies struggle to retain talent.
However, salaries are more closely linked to performance than before. Nearly 60% of CEO salaries are now paid in the form of variable compensation and long-term incentives (LTIs), up from 20-25% about a decade ago. The median salary for general managers is ₹7.05 crores, Aon said.
Manufacturing tops the charts among sectors to see business leaders get the biggest boosts. CEOs in the manufacturing sector are expected to get salary increases of 9.3%, followed by the information technology and IT services sector at 9.2%. Senior executives in the financial services, life sciences and consumer sectors are expected to see increases of 8.2%, 8.4% and 8.1%, respectively.
The wage increases come after nearly two years of stagnant or moderate increases due to pandemic-related disruptions. Many CEOs took pay cuts, and some even lost their salaries as companies struggled to stay afloat, and many workers were laid off to cut costs.
But with business activity resuming to near pre-pandemic levels, pay rises and the executive talent war are in full swing. “As a result of the pandemic, talent is scarce, and the cost to attract, retain and engage the leadership talent that grows business is rising rapidly,” Sethi said in a statement. “Not only is the increase in average executive compensation the highest in five years, but variable compensation and equity grants have also increased, because companies cannot risk losing key talent at higher levels, because this has implications for business performance.
However, the consultancy noted that while LTIs are typically rolled out to senior executives, talent shortages and high employee turnover are forcing companies to roll them out to high-potential middle managers. “Typically, organizations look at 1-2 metrics to provide performance actions. Earnings, shareholder return and revenue are the three primary metrics used,” Aon noted in the data that was exclusively shared with Mint.
LTIs can be a mix of cash, performance shares, and restricted shares, and an employee’s LTI can be measured against company performance – earnings, revenue, cash flow, and employee returns. shareholders.
“Recovery options are also becoming popular in the financial industry and are now widely used,” Sethi said. A clawback works like a penalty where the employee must return some of the money or benefits stipulated in a contract under specific circumstances. as an early release.
Aon noted that the vesting period for the stock options, which was five years earlier, has gradually decreased. After stock options are granted, the waiting period after which staff obtain the right to purchase shares is the vesting period. For all instruments, the vesting period is generally three to four years.
But the frenzy of retaining their best selves allows startups to become more nimble and gain board approval to reduce vesting periods.
