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Indian CEOs' pay goes the US way

Stock options component and productivity linked incentives form major part of pay packages

Indian CEOs’ pay goes the US way
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Indian CEOs’ pay goes the US way 

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- CEOs of top cos get more than 500 times the median salary of their company's permanent employees in FY20

- Salaries of three CEOs of top Indian IT firms indicate that the variable component of compensation becoming the major part of compensation structure

- Not only promoters, but startups are also hiring many technology professionals at hefty salaries, which is more than 4-5 times of their average employee salaries

Bengaluru: SALARY and compensation of top executives working in Indian companies are increasingly following the US model as more stock options and performance-linked incentives (PLI) become part of the salary structure.

Similarly, the wage gap between the top executives and median remuneration of employees are rising, which is one of the key features of the US system.

"If we see, India Inc in general and IT services firms & startups in particular, we are following more the US-model of compensation than the European one. That's why, the variable pay and stock component in the salary structure are rising over the years for top executives," said Pareekh Jain, a IT outsourcing advisor and founder of Pareekh Consulting.

This trend is reflected in the salaries of chief executives in Indian IT firms.

IT services major Wipro's CEO Thierry Delaporte drew a pay package of $8.7 million (around Rs 64.3 crore) in the financial year 2020-21, according to a regulatory filing by the company. Under this compensation structure, he received about $1.31 million in salary and allowances (about Rs 9.6 crore), $1.54 million in commission and variable pay, and $5.18 million in other components.

Similarly, Infosys' CEO Salil Parekh's annual pay package increased 45 per cent to Rs 49.68 crore in FY21, out of which more than half of the total amount came from exercise of stock options. Market leader Tata Consultancy Services (TCS) CEO, Rajesh Gopinath took home a total of Rs 20.3 crore (around $2.8 million) during the last financial year, out of which about Rs 17 crore came from commissions.

Salaries of three CEOs of top

Indian IT firms indicate that the variable component of compensation becoming the major part of compensation structure.

Apart from variable portion rising in salary structure, even the median salary differentials are increasing in India. For instance, the ratio of Infosys' CEO salary to the median remuneration of employees increased to 689:1 from 502:1 a year earlier. As per SEBI filings, the top-paid executives of Hero Motocorp, Infosys, Tech Mahindra, Bajaj Auto and Hindalco Industries earned more than 500 times the median salary of their company's permanent employees in FY20.

"The median salary difference is rising in the last few years. So at some point of time, median salaries will also have to go up," said Jain of Pareekh Consulting. He, however, added that salaries of top Indian IT companies' CEOs are comparable with their global counterparts. Not only traditional Indian firms, even the top level salaries of domestic startups have high median differentials with some executives getting lion's share of the wages. Recently, discount brokerage firm Zerodha's board has passed a resolution enabling its three directors to draw salary up to Rs 100 crore. Not only promoters, but startups are also hiring many technology professionals at hefty salaries, which is more than 4-5 times of their average employee salaries.

Debasis Mohapatra
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