Salaries Of Indian CEOs Increasing At Alarming Pace; Performance Being Ignored!

In an exclusive study conducted by Institutional Investor Advisory Services, it has been found that the growth in salaries of Indian CEOs has outpaced performance.

From a business perspective, this seems ridiculous, because this means that performance is now no longer a criterion for salary increase!

Is this the ugly side of capitalism which we are witnessing, wherein the CEO’s wealth creation is being done at the expense of company’s growth and performance?

Will this bubble soon burst, taking down businesses and organizations, all over the nation?

Performance No Longer a Criterion for Salaries of Indian CEOs?

In a stunning revelation, the study has found that the top paid CEOs of Indian organizations are getting a regular, unprecedented increment in salaries, without any regard to performance.

In fact, 6 out 9 top paid CEOs in India are leading companies which are not even part of Sensex 30!

While pay of these CEOs has increased by 85% in the last 5 years, revenues have increased by only 48%, and profits only 45%.

Hence, we can clearly see the divide between salary increase and performance of these companies here.

Rs 10 Crore: Average Salary in the Industry Now!

The report showcases that pay bracket of Rs 10-Rs 20 crore is now industry average.

Out of top 123 companies in BSE 500 index, 94 CEOs are getting between Rs 10 to Rs 20 crore. 12 CEOs are getting Rs 35 crore or above, and 17 CEOs are getting between Rs 20 crore and Rs 35 crore.

In the past one year, CEOs getting salaries of Rs 10 crore and above have increased by massive 16%.

Pay Gap Increasing: Will It Lead To Unrest?

The study found that pay gap between an average employee and their CEO across organizations are increasing, which can lead to massive unrest and agitation.

If we talk about all companies listed under BSE, then the CEO is paid 122 times more than an average, median employee. The CEO is getting an average of Rs 11.4 crore as salary. And, BSE 500 list, the pay gap is 88X.

The report states that Nomination and Remuneration Committees (NRC) should intervene, and create well-defined performance metrics and claw-back mechanisms to ensure that the pay gap is reduced, and CEOs are paid salaries linked with performance.

Here are the disclaimers regarding the report:

• Data has been sourced from annual reports for S&P BSE 500 companies.
• Data pertains to the calendar year 2016 or FY2016-17 (depending on financial year-end for respective companies).
• PSUs have been excluded from the analysis, except for the pay range chart.
• The fair value of stock options granted has been included while calculating overall pay.