2023 Deloitte India Executive Remuneration Survey

Average CEO compensation in India for FY23 stands at INR 11.9 crore, up by 6.25 percent:

Deloitte India’s Executive Remuneration Survey 2023

Mumbai, 24 April 2023: CEO compensations have continued to increase, reports the latest leg of Deloitte’s Executive Remuneration Survey. However, the high post-pandemic growth rate seen in FY22 has moderated to 6.25 percent growth in FY23. The size of a company continues to be a large determinant of the CEO/CXO pay. For example, the average CEO pay in the smallest reported revenue segment (<INR 1,000 crore) was 31 percent of that seen in the largest revenue segment (>INR 20,000 crore). The compensation levels for Sales Heads (average: 2.9 crore) surpassed Business Unit Heads (average: 2.82 crore) as more Sales Heads have a pan-India responsibility across businesses. COOs (average – INR 4.8 crore) and CFOs (average – INR 4.2 crore) continue to be amongst the top-earning CXO roles. The average CXO compensation stood at INR 3.2 crore.

Speaking on the findings, Aditya Nanavaty, Director, Deloitte India said, “Indian executive talent continues to be highly sought after, including outside India. Rise in executive pay in India also correlates with relatively faster economic growth in India.”

“Beyond the overall CTC, executive remuneration decisions today have added design variables like pay-mix, long term incentive vehicle choice, performance metrics and linkages. Boards of prominent companies are investing greater attention in balancing shareholder, financial, competitive, and regulatory dimensions, while managing executive remuneration,” he added, elaborating on the role of Boards in determining remuneration. Here are the key trends in their composition.

Sharper focus on performance pay
The mix of pay suggests a continued focus on ‘pay for performance’. About 56 percent of pay for CEOs and 38 percent of pay for CXOs is ‘at risk’ or variable. Higher pay at risk enables companies to continue to offer higher executive compensation in a competitive market. In case the anticipated performance does not materialise, actual earnings for CEOs/CXOs from the ‘at risk’ component could be lower. Companies are now making their short-term incentive plans more stringent by using more stringent company performance targets. Profitability-linked metrics continue to show the highest prevalence.
High emphasis on pay for performance implies that the realised earnings from the ‘at risk’ component could drop to zero in case of poor share price and/or business performance.

Performance shares trump traditional ESOPs
About 33 percent of pay for CEOs was in the form of long-term incentives (for example, ESOPs). For CXOs, long-term incentives accounted for 18 percent of pay. Long-term incentives typically accrue or vest to executives over three or more years.

2023 marks the first year where the prevalence of classic stock options as a vehicle for long-term incentives has dropped below 50 percent. Since January 2022, the majority of new long-term incentive proposals to shareholders were for deep-discounted vehicles, such as RSUs and performance shares. An RSU is a deep-discounted stock option with an exercise price equal to the face value of the share.

Several RSU proposals without performance conditions received an unfavourable voting recommendation/vote from proxy advisory firms and institutional shareholders. Performance shares (RSUs with performance-linked vesting) are fast emerging as a preferred vehicle for companies, while also being acceptable to proxy advisors and institutional shareholders. FY23 saw several prominent companies in India adopt performance shares as their long-term incentive vehicle for the first time.

Background:
The above findings are part of the 2023 Deloitte India Executive Remuneration Survey. The study covers findings across 450 companies in India across Financial Services, IT/ITeS, Manufacturing, Consumer Products, Services, and Life Sciences, on the quantum and structure of executive compensation. The study uses a consistent definition of pay and an approach to value long-term incentives, such as stock options. This makes the quantum across various participants comparable. This is the fourth annual edition of the study.

Notes to the editor for reference purposes only:
This press release has been issued by Deloitte Touche Tohmatsu India LLP Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”), its network of member firms, and their related entities. DTTL and each of its member firms are legally separate and independent entities. DTTL (also referred to as “Deloitte Global”) does not provide services to clients. Please see www.deloitte.com/about for a more detailed description of DTTL and its member firms.
The responses received from the participants were validated and checked for accuracy and intended interpretation. India, wherever mentioned in the document, reflects the collective views of the survey respondents only.