Average Indian CEO pay reaches around Rs 14 crore per year, up 40% from pre-pandemic level: Deloitte report

An analysis of CEO changes in BSE 200 companies (excluding PSUs) revealed that 45 percent of companies witnessed a CEO change over the past five years.

The average Chief Executive Officer (CEO) compensation stands at Rs 13.8 crore a year, up 40 percent compared with pre-COVID-19 levels, according to the Deloitte India Executive Performance and Rewards Survey 2024.

Every second CEO had a target compensation of more than Rs 10 crore in 2024, compared with every third CEO in 2020. CEOs who were also promoters or members of the promoter family are paid Rs 16.7 crore on average. Over the past four years, the ratio of promoter to professional CEO compensation increased significantly from 1.0 to 1.3.

To be sure, 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 as 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,” Dinkar Pawan, Director of Deloitte India, told Moneycontrol.

An analysis of CEO changes in BSE 200 companies (excluding PSUs) revealed that 45 percent of companies witnessed a CEO change over the past five years. Six of every 10 new CEOs are homegrown (internally appointed). The remaining four CEOs were external hires.

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While CEO compensation has increased, more than 50 percent of target compensation is pay-at-risk. For professional CEOs, pay-at-risk at 57 percent is much higher than for promoter CEOs at 47 percent. Professional CEOs have 25 percent of their target compensation delivered through long-term incentives, which for most companies, is paid through share-linked incentives. COOs and CFOs continue to command the highest compensation premiums in India amongst the other CXOs.

For these two roles, 44 percent of target compensation is at-risk, with almost half of it being driven through long-term incentives.

“India Inc has consistently witnessed an increase in the CEO pay-at-risk as the value of incentives, particularly long-term incentives via share-based payments, has gone up over time due to a higher adoption of long-term incentives. Pay-at-risk has further increased from 55 percent to 57 percent for Professional CEOs between 2020 and 2024,” Pawan said.

Assessing CEO and CXO performance 

On an average, CEOs of over Rs 20,000 crore revenue responsibility make Rs 20 crore per annum. Further, the CEO compensation has risen the fastest in technology and lowest in the financial services and consumer sectors.

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“Over the last 5 years, the S&P BSE IT Index has grown by almost 2x of the comparable consumer index or the Bank Index. Also, given that a significantly higher proportion of CEO compensation in IT is linked to share-based payments, compensation increase has been one of the fastest in this industry,” Pawan said.

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.

Additionally, companies are transitioning towards a more structured approach to bonus payouts, and the role of discretion in compensation decision-making is on the decline. 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); and the prevalence of stock options, or ESOPs, continues to decrease (49 percent of companies in 2024 vs 68 percent of companies in 2020).

Further, 9 percent of companies that saw a CEO change transitioned from a Promoter CEO to a professional CEO. Overall, 3 out of every 4 CEOs in India is a Professional / Non-Promoter incumbent.

"We have observed that a few promoter-led companies have now appointed Professional CEOs. This helps them leverage expertise as well as manage transitions at a promoter-family level if required. Some of these ex-CEOs who are also a part of the promoter family have either retired or taken up Executive or Non-Executive Chair roles," Pawan added.