CXOs & top exec salaries to grow by 5-year-high of 8.9% in 2022: Aon study 

India Inc.’s CEOs, CXOs and senior executives are expected to take home a five-year-high average increment of 8.9 per cent in 2022 due to strong fundamentals of the economy and positive business sentiment, according to rewards firm Aon’s annual executive rewards survey released on Wednesday. This increment is one percentage point lower than its 9.9 per cent increment projection for overall employees for the same year. 

The salary hike of senior executives is an increase from 2021’s 7.9 per cent, according to the survey which analysed data across 475 companies from more than 20 industries. The organisation also expects the salary increases to be buoyant over the next 24 months as the salary budgets of companies have been steadily rising since the pandemic began. And the war for executive talent is in full swing, it pointed out. 

Median CEO compensation has reached Rs 7.05 crore, the study said. 

Sector-wise, manufacturing is set to give out highest hike of 9.3 per cent, closely followed by Technology & ITes at 9.2 per cent, Life Science at 8.4 per cent, Financial Institution at 8.2 per cent and the consumer segment at 8.1 per cent. 

Function-wise, Sales, with Marketing & Customer Service at Rs 1.94 crore and Manufacturing Operations at Rs 1.93 crore, these two sectors pay their top executives and senior management the highest. Legal ranks the lowest at Rs 1.27 crore, while HR & Admin falls in the middle at Rs 1.65 crore average pay.  

Nitin Sethi, partner and CEO, India for Human Capital Solutions at Aon, said, “Over the last few decades, a large percentage of India Inc has turned to outside talent instead of building from within. However, in the wake of the COVID-19 pandemic, talent is in short supply and the cost of attracting, retaining and engaging leadership talent that grows business is rising rapidly. Not only is the average executive compensation increase highest in five years, but variable pay and equity grants have also risen as companies cannot risk losing key talent at senior levels as this has implications on delivering business performance.” 

The pay composition for CEOs is 50 per cent, which is fixed pay (assured irrespective of their performance), 21 per cent is variable pay (determined by performance in the year under consideration) and 29 per cent is long-term incentives or LTIs (determined by performance over a period of more than a year).  For CEO-1 or executives reporting directly to the CEOs, such as the CFOs or COOs, the mix is 61, 20 and 19 per cent, respectively. For CEO-2 or those reporting to executives who report to the CEOs, the mix changes as 69, 17 and 13 per cent, respectively.   

Pritish Gandhi, director and practice leader, India for the Executive Compensation and Governance Practice at Aon, said the move towards higher risk-based pay, which is common in the US, is a continuing trend in India. 

Besides, there is pressure on established companies to increase cover on LTIs to beyond the senior-level executives, said Sethi. “India will begin to see the use of LTI on a broad base of talent like in the US. It won’t change overnight, but progressive organisations are carefully evaluating if they can also increase the coverage to have a solid proposition.” 

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