India’s senior executives including chief executives are likely to get a 9.1% average salary hike in 2023 compared to 9.7% in 2022 and 7.9% in 2021, according to Aon’s 12th annual salary survey. Aon plc, a global professional services firm, has released findings from its latest ‘Executive Rewards’ survey in India in which it has analysed data across 519 companies in India from more than 25 industries covering over 50 executive positions. The average chief executive compensation in 2023 is Rs 8.4 crore, according to Aon that mapped about 150 CEO data points. It has increased by 21% in the last four years, higher than pre-COVID years.
For board and senior managerial positions, one in three organisations are focusing on improving diversity levels. Company boards are also embedding environmental, social and governance (ESG) factors, diversity and succession metrics in the long-term and short-term goals for CEOs and executive leaders. Within Pay at Risk – the sum of variable pay and long-term incentives (LTI) for total compensation – the component of LTI has increased to 40% of the total compensation, up from 26% 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, organizations seek to adopt executive pay programs that drive the right behaviours, are cost effective and contribute to long-term business results,” Nitin Sethi, chief executive officer, Human Capital Solutions, India and South Asia at Aon, said. “Organisations can therefore benefit from a data-driven approach to make better decisions regarding complex executive compensation issues while navigating business volatility,” Sethi said.
The study found that amongst the Bombay Stock Exchange’s (BSE) top 30 companies, LTI is provided at 176% of fixed pay for CEOs and at 103% 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 (BSE top 30) is Rs 10 crore.
Compensation, and its related governance, continues 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 is additional checks before vesting of long-term executive incentives – particularly in cases of material financial restatement,” Pritish Gandhi, director and practice leader of the Executive Compensation and Governance Practice in India at Aon, said.
“At the same time, claw back clauses which allow organisations to retrieve past pay-outs under exigent circumstances of fraud and misconduct are also being applied for a duration of three to five years, as organisations design their 2023 executive compensation programs,” Gandhi said.