In the financial year 2024 (FY24), there has been a significant rise in the number of CEOs and managing directors (MDs) at Nifty 50 companies earning over Rs 50 crore. This figure has doubled compared to five years ago.
The Numbers: CEO Pay Surge
A recent Deloitte study, highlighted by Economic Times, reveals that in FY24, 22% of CEOs and MDs in Nifty 50 companies took home more than Rs 50 crore. This is a sharp increase from just 10% in FY19. The study focused on 41 Nifty 50 companies, excluding public sector undertakings (PSUs) and companies with no active incumbents or where the MD had voluntarily given up their compensation.
Breakdown of Earnings
For the 10 promoter-incumbents (CEOs who are also major shareholders), 30% earned over Rs 50 crore in FY24, up from 27% in FY19. Among the 31 non-promoter incumbents, 20% earned more than Rs 50 crore, a 4% increase from FY19.
The study found that the median compensation for Nifty 50 CEOs increased substantially from Rs 13.1 crore in FY19 to Rs 22.6 crore in FY24. For promoter CEOs, the pay rose by 6.9% from Rs 23.3 crore in FY23 to Rs 24.9 crore in FY24.
Factors Driving the Pay Increase
The report notes that the year-on-year growth in CEO compensation, particularly for non-promoter CEOs, has been significant, with a 19.6% increase from FY23. Dinkar Pawan, Director at Deloitte India, explained that CEO pay in India is now comparable to that in the US. He attributed this rise to market dynamics, with new large-cap CEOs commanding substantial pay packages.
Sector-Specific Compensation
CEOs in IT services and heavy manufacturing sectors continue to earn the highest salaries due to the scale of operations and often international locations. In FY24, median CEO pay in IT services companies was Rs 49.8 crore, while in heavy manufacturing it was Rs 42 crore.
For other sectors, the median pay was as follows:
- Auto companies: Rs 24.9 crore
- Consumer companies: Rs 22.6 crore
- Pharmaceuticals: Rs 18.6 crore
- Financial services: Rs 17 crore
IT services and consumer industries saw some of the highest year-on-year increases in CEO pay, with rises of 67% and 43%, respectively. These increases are largely driven by higher share-based payments and share price growth.
Pay Structure and Performance
The ratio of CEO pay to the median remuneration of employees has also increased, rising to 290 in FY24 from 263 in FY23. For non-promoter CEOs, the performance-based pay component has risen to 56% from 53% in FY23. However, promoter CEOs experienced a slight decrease in variable pay, down to 47% from 49% in FY23, due to a drop in profit-linked commissions.
Factors Influencing CEO Pay
When determining CEO compensation, nomination and remuneration committees (NRCs) and boards consider various factors. These include the CEO’s location, track record, scale of operations, expected growth, and the cost of replacing the CEO.
Overall, the trend indicates a growing alignment of Indian CEO compensation with global standards, reflecting both the increasing value placed on top executive talent and the changing dynamics of the market.
