Article: Cash based compensation for top executives

Compensation & Benefits

Cash based compensation for top executives

Organizations are moving towards valuing the Top Team Executives below the MD/CEO as equal stakeholders in business performance.

Global management consultancy, Hay Group, today released the annual Top Executive Compensation Report 2014‐15, which finds that compensation of CEOs and MDs in India is expected to grow by 10.2 per cent in 2014‐2015, slightly higher than 10 per cent in 2013‐14. Top executives, part of the senior management team, are set to see a 10.5 per cent increase in their pay, up from 10.4 per cent last year.  

 Hay Group’s Top Executive Compensation Report 2014‐2015 provides a comprehensive analysis of compensation practices for top executives in Indian organizations. This year’s report features insights based on the analysis of 2610 jobs across 205 organizations. All information analyzed is of December.

Hemant Upadhyay, Managing Consultant and Leader of Executive Rewards Practice, Hay Group India comments, ‘The economic outlook is positive and organizations believe that the stable government will give a spurt to their business prospects. From an overall perspective, India’s top management compensation mix continues to be more driven by fixed pay, in comparison to other Asian, European and American economies.’

The study found that CEO salaries are 1.9 times those of Business Core roles, and 2.1 times those of Business Enabler roles. The difference between the MD/CEO salaries to that of other Top Executives roles has reduced over the years, indicating that these are being considered as important stakeholders. 

Elaborating Further, Hemant adds, ‘Clearly, organizations are moving towards valuing the Top Team Executives below the MD/CEO as equal stakeholders in business performance. It’s important to note that a significant part of the compensation (30‐40%) of these roles is variable in nature, with a link to business performance, which only strengthens the fact that these are considered high impact roles.’

The report finds that in the overall compensation structure, benefits are increasingly becoming a smaller component. Instead of focusing on benefits, organizations are moving towards a cash based compensation structure. However, organizations are using benefits and perks as ways of recognizing their top performers. The idea is to utilize these benefits to drive the role model behaviors in the organization.

The study by Hay Group suggests that performance linkage is steadily gaining importance. Performance linked incentive plans (Short and Long‐Term Incentives) have become key elements of Top Executive Compensation. The objective of these plans is driving performance on key business and individual metrics.

There has been a steady increase across industry sectors in the prevalence as well as percentage of incentives for MD/CEO and for Other Senior Executives. This implies that there is direct alignment between the goals of the company and the compensation plan, as well as the top executive compensation is commensurate with the contribution/ impact of the role.

 

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Topics: Compensation & Benefits, #Corporate, #Trends

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