Professional CEOs got a raise in 2019-20 even as average salaries of their promoter counterparts dropped due to the economic slowdown before the pandemic struck. However, promoter CEOs, on average, took home a 62% higher compensation than their professional counterparts.
As per the ‘million-dollar CEO club’ study by EMA Partners, commissioned by TOI, the average salaries of professional CEOs rose 6.5% to Rs 13 Cr in 2019-20 and that of their promoter counterparts declined by about 9% to Rs 21 Cr.
The study is based on a sample of BSE 200 companies and it does not include stock options. Since the study takes into account compensation details in the balance sheets of companies for 2019-20, it excludes the trends that may have shaped CXO (including CFO) compensation following the Covid pandemic.
The number of CXOs earning a million dollars (Rs 7 crore*) has inched up to 150 from 146 last year. This club is led by the Marans (Kalanithi Maran and Kavery Kalanithi) with a compensation of Rs 87.5 crore, which has remained unchanged.
Of the total, 81 are professional CEOs and 69 are promoters. Overall professional compensation has increased by 1.5%, while promoter compensation has risen by nearly 3%.
EMA Partners India MD K Sudarshan said, “The trend over the last 12 months indicates that promoter CEOs have indeed taken a larger hit on their compensation notwithstanding potential dividend earnings out of their businesses as shareholders. On the other hand, we have seen an increase in the overall compensation for professional CEOs. We believe this anomaly will see a gradual correction as more professionals step up and increase their compensation driven by business performance.”
It is to be noted that the gap between the average salaries of the promoter (Rs 23 crore in FY19) and professional CEOs (Rs 12 crore, also FY19), which was nearly double, has reduced to 62% in FY20.
Sudarshan added that fixed compensation will have limitations and a large component of CXO compensation will be subject to overall value creation. The share of stock-related compensation has been substantial in many cases. While in a growth environment, compensation will continue to grow and is well justified, however it does come under severe scrutiny during such times when business growth is muted. Hence it becomes important for the CXOs to set the right example for the rest of the organization. Also, as there is no difference in the role of professional and promoter CEOs in terms of responsibilities, experts believe that the compensation of a promoter CEO in comparison to a professional CEO should not be very high just because of ownership.