According to Deloitte, the CEO compensation has increased (Representational)
The average CEO compensation in India stood at Rs 13.8 crore, up 40 per cent compared with pre-COVID-19 times, and more than half of the overall remuneration is linked to short-term and long-term incentives, says a Deloitte report.
According to the Deloitte India Executive Performance and Rewards Survey 2024, average CEO compensation stands at Rs 13.8 crore, while CEOs who were also promoters or members of the promoter family are paid Rs 16.7 crore on average.
"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," said Anandorup Ghose, Partner, CHRO Programme Leader, Deloitte India.
According to Deloitte, while CEO compensation has increased, more than 50 per cent of target compensation is 'pay-at-risk'. For professional CEOs, pay-at-risk at 57 per cent is much higher than for promoter CEOs at 47 per cent.
Professional CEOs have 25 per cent of their target compensation delivered through long-term incentives, which for most companies, is paid through share-linked incentives.
According to Deloitte, CEO compensation in India has seen high-single-digit annualised growth rates.
"The wide gap between median and average CEO compensation (Rs 9.3 crore versus Rs 13.8 crore) indicates the wide range of compensation numbers and some outliers on the higher end," it added.
While assessing CEO and CXO performance, most companies use a holistic scorecard that includes a mix of financial and non-financial metrics and targets. However, incentives for CEOs and CXOs are still tilted towards financial company-level goals within those scorecards.
On long-term incentives, Deloitte said the percentage of companies using share-based incentives continued to increase (75 per cent in 2024 vs 63 per cent in 2020) and the the prevalence of stock options, or ESOPs, continued to decrease (49 per cent of companies in 2024 vs 68 per cent 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," Anandorup Ghose added.
Meanwhile, an analysis of CEO changes in BSE 200 companies (excluding PSUs) revealed that 45 per cent of companies witnessed a CEO change over the past five years. Six of every 10 new CEOs are homegrown (internally appointed) and the remaining four CEOs were external hires.
The fifth edition of the Deloitte India Executive Performance and Rewards Survey was launched in September 2023. More than 400 organisations participated in this B2B India-specific survey, which did not include any public sector companies.
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