Finance over tech: Salaries of CFOs double that of CTOs says AON survey

• Payment for India CEOs pay had a 20% variable component in 2022-23.
  
• The long term incentive(LCI) component has increased to 40% of the total compensation up from 26% in 2015-16.
  
• For board and senior managerial positions, one in three organizations are focusing on improving the diversity levels

Top executives in India will see their salaries rise by 9.1% on an average in 2023, as per an Executive Rewards Survey by AON.

Findings of the Executive Rewards Survey in India which analyzed data from 519 companies and more than 25 industries projects a 9.1% average salary increase for senior executives in India in 2023.

The average CEO compensation is ₹8.4 crore and has increased 21% in the last four years. It rose 5.1%, 7.9% and 9.7% in 2020, 2021 and 2022, respectively.

Chief Financial Officer is the highest-paid CXO role, barring CEOs, amongst the BSE 100 companies. CFO is the highest paid CXO role, the salary being double of the CTO which is the second highest paid role amongst BSE 100 companies.

Senior executives’ salary increases continue to focus on pay at risk, indicating the emphasis on rewarding executives for the value they bring to the organization. Payment for India CEOs pay had a 20% variable component in 2022-23, while in the US it was 23%. Meanwhile the long term incentive (LCI) component has increased to 40 per cent of the total compensation up from 26% in 2015-16.

The study also found that among the top 30 companies in the Bombay Stock Exchange, LTI was provided at 176% of fixed pay for CEOs while it was at 103% for other C level executives like COO, CFO, sales leader and chief human resources officer. The average LTI amount for CEOs for the same set organizations is ₹10 crore.

For board and senior managerial positions, one in three organizations are focusing on improving the diversity levels. Boards are embedding environmental, social and governance (ESG) factors, diversity and succession metrics in the long-term and short-term goals for CEOs and executive leaders. However, it was found that 60% of companies don’t measure employee attitudes on ESG initiatives.

“In a rapidly evolving, volatile business environment, organizations seek to adopt executive pay programmes that drive the right behaviours, are cost effective and contribute to longterm business results. Organizations can therefore benefit from a data-driven approach to make better decisions regarding complex executive compensation issues while navigating business volatility,” said Nitin Sethi, CEO- Human Capital Solutions, India and South Asia at Aon.

Compensation, and its related governance, continues to be an important issue for employers as they strive to build and maintain a resilient workforce. Pritish Gandhi, director and practice leader of the Executive Compensation and Governance Practice in India at Aon, says, “With rising shareholder activism, pay governance has become a key focus area for India Inc. As a result, organizations are updating their Malus clauses which refers to additional checks before vesting of long-term executive incentives – particularly in cases of material financial restatement.”

At the same time, claw back clauses which allow organizations 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 organizations design their 2023 executive compensation programmes.

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