The average salary of top executives in Indian companies was 13% higher than the previous fiscal year, despite the pandemic. This is because companies wanted to retain their chief executives and managing directors to guide them through the unprecedented situation and disruptions in the business environment.
Low base in FY20, when top executives received only a 3% pay rise, was partially responsible for the double-digit increase in pay in fiscal 2021. Many companies experienced disruptions in their business during the 10 days following the announcement by the government that a nationwide lockdown was in place to stop the spread of the Covid-19 virus. Many companies chose to cut or freeze variable and bonus pay, thereby reducing a significant portion of the top executives salaries.
According to the analysis of 80 BSE 200 companies, the average pay for CEOs and MDs was Rs 10.41 crore, compared to Rs 9.22 crore in FY20. This calculation is based on data taken from annual reports. Promoters are not included.
These companies include sector leaders such as Infosys and Tata Consultancy Services. Tata Steel, Tata Steel. Larsen & Toubro. Godrej Properties. Ashok Leyland.
"The stock market has performed well, and many of the industry segments have provided good returns to shareholders. This, along with demand revival towards last half of fiscal, strong corporate earnings, and strong private equity markets has led to an increase in CEO compensation," Harsh Goenka (chairman of the RPG Group) said.
Data on CEO remuneration includes compensation data such as salary, bonus, value perquisites, and commission. It is worth mentioning that many large corporations were forced to increase their budgets to retain top executives who are suited to the current business environment. Many CEOs have moved on to start-ups and other new businesses that promise huge wealth creation.
"The startup ecosystem is booming without any restrictions to pay compensation. Goenka stated that large companies want to retain their talent and reward them.
Board members who are members of the nominating and remuneration committees of companies agree that the CEOs faced the most difficult and challenging task of leading their people and companies through turbulent times. They were therefore rewarded with no hesitation by the board.
"We discussed that when the company's performance has peaked despite the pandemic," the financial magazine quoted Shailesh Haribhakti as the chairman of Haribhakti & Co, and an independent director at many Indian companies as saying. He said that he was happy to give a significant rise in the salaries of CEOs.
Arun Duggal (non-executive chairman at rating firm Icra) and independent director told the publication that the chief executives faced the most difficult task of managing this unprecedented disruption to the business. Their work has been more challenging than normal, for which they were rewarded.
He said that shareholders were well compensated and stocks performed well. This contributed to CEOs earning more.