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The economic slowdown has also affected India Inc’s corner offices — executive directors and above. In 2013-14, the number of new entrants to the crorepati club (the promotersand professionals earning over Rs 1 crore a year) more than halved to 42, compared with 87 the previous year. At the end of March this year, there were 640 promoters and professionals who had annual pay packages of Rs 1 crore or more each. This number was 598 at the end of 2012-13 and 511 a year earlier.
The impact of the slowdown is most visible among promoters/owners. The number of promoter-chief executives earning more than Rs 1 crore increased by 17 in 2013-14, against 51 the previous year. As for professional CEOs, the club added 25 members last year, against 36 in 2012-13.
Professional CEOs also saw a much faster increase in their salaries than their promoter/owner counterparts. Average salary of a professional CEOs grew 26.1 per cent last financial year, compared with 5.8 per cent for promoter/owner CEOs. A typical professional CEO (based on median value) took home a pay of Rs 2.6 crore in 2013-14, up from Rs 2.2 crore a year earlier. This was on par with what a typical promoter CEO earned last year.
The analysis is based on data from companies whose compensation figures for board members were available for the past three financial years. The actual number of crorepati CEOs could be higher, as some companies are still to publish their annual reports for last financial year.
Experts attribute the higher salaries to companies hiring top-notch professionals to help them grow faster in a competitive and globalised business environment.
“The business environment has become complex and too challenging for promoters to handle single-handedly. They are increasingly seeking help from experienced professionals to help their companies beat competition and crack newer markets,” says G D Sharma, principal, Beeline HR Advisory.
Unlike a promoter, it is much easier to make a professional CEO directly responsible and accountable for a company financial outcome. “Investors, especially large institutional investors, put pressure on companies to hire outsiders at high salary packages and make them responsible to chart the company’s growth path,” he adds.
Subhanu Saxena of Cipla is a case in point. A professional with global experience, he joined the drug maker as its CEO in February last year. His clear brief was to help Cipla break into the international market and close the growth gap with peers. With total pay and rewards of Rs 21.7 crore in 2013-14, Saxena was the highest-paid professional CEO among pharma companies and fourth among the top five in the country. His pay packet was fatter than Yusuf Hamied, his boss and the company’s promoter.
A similar trend was visible at Tata Group, where most CEOs earned much higher than Chairman Cyrus Mistry. Tata Consultancy Services Managing Director & CEO N Chandrasekaran was India’s seventh-best-paid professional CEO. The trend was similar at other key group companies like Tata Motors, Tata Steel and Indian Hotels.
Mid-sized companies like Jyothy Laboratories also cut their dependence on promoters by hiring professional CEOs at market-leading salaries. CEO S Raghunandan was among the top-earning professional CEOs in the country, though he still earns less than the company’s promoter & MD.
Though the crorepati club continues to be dominated by promoters and owners — 364 of the 640 CEOs earning more than Rs 1 crore are promoters — the group of highly paid professional CEOs is growing at a faster rate than promoter CEOs.
Among promoter CEOs, Sun TV’s Kalanithi Maran and Kavery Kalanithi were top earners, with Rs 59.9 crore each in 2013-14. This was marginally higher than their annual earnings in 2012-13. Next in line was Aditya Birla Group’s Kumar Mangalam Birla, with a combined compensation of Rs 39 crore during the year (down nearly 20 from per cent from a year earlier). He was followed by Pawan Kant Munjal of Hero MotoCorp and Lupin’s D B Gupta. Gupta’s compensation nearly tripled in past two years, in line with his company’s good show.
If we exclude top earners, the gap between promoters and professional CEOs however continues to narrow and is likely to vanish in future.
Clarification
An earlier version of this article had given incorrect figures for the annual compensation package of three Maruti Suzuki executives. The error is regretted.
