Senior executives in India to receive 9.1% hike in salaries: Study

Within ‘Pay at Risk’, which is the sum of variable pay and long-term incentives (LTIs) for total compensation, the LTI component has increased to 40 percent of the total compensation, up from 26 percent in 2015-16. (Illustration by Suneesh Kalarickal)

Senior executives in India are projected to receive an average 9.1 percent increase in their salaries in 2023 from 8.9 percent in 2022, as per a study.

At present, average CEO compensation stands at Rs 8.4 crore, increasing 21 percent in the last four years, data from Aon India’s 12th Executive Rewards Survey 2022-23 showed. The report analysed data across 519 companies from more than 25 industries.

Aon is a global professional services firm.

Further, for board and senior managerial positions, one in three organisations is focusing on improving diversity levels. As part of an accelerated effort, boards are embedding environmental, social and governance (ESG) factors, and diversity and succession metrics in the long-term and short-term goals for CEOs and executive leaders.

Within "Pay at Risk", which is the sum of variable pay and long-term incentives (LTIs) for total compensation, the LTI component has increased to 40 percent of the total compensation, up from 26 percent in 2015-16.

“Senior executives’ salary increases continue to focus on pay at risk, indicating the emphasis on rewarding executives for the value they bring to the organisation. In a rapidly evolving, volatile business environment, organisations seek to adopt executive pay programmes that drive the right behaviours, are cost-effective and contribute to long-term business results,” said Nitin Sethi, chief executive officer, of Human Capital Solutions, India and South Asia at Aon.

“Organisations can, therefore, benefit from a data-driven approach to make better decisions regarding complex executive compensation issues while navigating business volatility,” he added.

The Aon study found that among the Bombay Stock Exchange’s top 30 companies, LTI is provided at 176 percent of fixed pay for CEOs and 103 percent for other C-level executives, including the chief operating officer, chief financial officer, sales leader and chief human resources officer.

The average LTI amount for CEOs for the same set of organisations is Rs 10 crore. Compensation, and its related governance, continue to be an important issue for employers as they strive to build and maintain a resilient workforce.

“With rising shareholder activism, pay governance has become a key focus area for India Inc. As a result, organisations are updating their Malus clauses that are additional checks before vesting of long-term executive incentives – particularly in cases of material financial restatement,” said Pritish Gandhi, director and practice leader of the Executive Compensation and Governance Practice in India at Aon.

“At the same time, clawback clauses which allow organisations to retrieve past payouts under exigent circumstances of fraud and misconduct are also being applied for a duration of 3-5 years as organisations design their 2023 executive compensation programmes,” he added.