Time to get out of the comfort zone? This big change is affecting salaries of CEOs

Indian firms are changing their style of working and rewarding compensation and are also getting more and more performance driven.

This means, employees have to come out of their comfort zone and perform in a bid to get desired salaries and variable pays. Well, this is now also becoming a norm for CEOs of the India Inc.

The fixed pay of CEOs is dropping and their salaries are now based on performance.

Nearly 50 per cent of the CEO salary is fixed and the remainder is performance-based.

Aon Hewitt had conducted an executive compensation survey 2015-16 across eight industries. ET reported that one of the major factors for high percentage of pay for performance is pressure from shareholders, which has prompted companies to tie a greater percentage of their CEO compensation to outcomes and results.

"CEO compensation is outcome-driven. Shareholders need to see there is connection between compensation and outcome. As CEO compensation increases so does percentage of performance-linked pay," Anandorup Ghose, partner, Aon Hewitt, told ET.

On one hand where Fortune 250 companies have nearly 70 per cent allocation to long-term incentives, globally, pay for performance can account up to 85 per cent of CEO salary.

"Listed organisations are more aggressive in pay for performance, and these would also pay a chunk of CEO salary in ESOPs (employee stock option plans). The upside for listed companies is that markets are funding the CEO compensation," Ghose told ET.

Meanwhile, employees are lauding the move as it is a fair game.

Speaking about increments, the survey stated that there was a marginal drop in fixed pay at CEO and CXO levels.

Also, the best long-term incentives that companies are giving are the stock options.

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