Private CEOs' median package is Rs 7.9 crore; 22 times that of PSU chiefs': IMA study

Top executives in public sector undertakings (PSUs) are paid a fraction of what their private sector peers earn as the bloated compensation packages remain a sticky issue in India.

According to the 2018 Executive & Board Remuneration Report by IMA India, private sector heads earned 22 times more on an average than their public sector counterparts.

Executive Chairmen/CMDs in the private sector drew a median salary of Rs 7.9 crores in 2017-18 as compared to Rs 35.3 lakhs median pay earned by their equivalents in the public sector.

While a quarter of private sector Executive Chairmen/CMDs earned over Rs 15 crores, CEOs took home Rs 5.5 crores at the median with 27 per cent of them earning more than Rs 10 crores. A median is the mid-point of any distribution.

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The Whole-Time Directors (WTDs), earned Rs 1.9 crores, Chief Financial Officers (CFOs) made Rs 2.1 crores, and Company Secretaries (CS) pocketed Rs 55 lakhs. This means that a CS at a private sector company earns more than an Executive Chairman at a PSU.

The report further says that the CEO pay in the private sector has climbed strongly over the last three years, from Rs 3.2 crores in FY15 to Rs 5.5 crores in FY18.

Furthermore, at the highest management levels, private sector earnings grew faster in FY18 in comparison to previous years, as CEOs saw pay rise of 13.1 per cent in FY17 and 19.3 per cent in FY18, respectively. Whereas, Executive Chairmen's pay went up from 6.5 per cent in FY17 to 10.3 per cent in FY18.

More than 4 in every 10 Executive Chairmen/CMDs in the private sector earned Rs 10 crores or more last year while 11 per cent of them pocketed Rs 1 crore or less. Meanwhile, 7 per cent CMDs in PSUs received over Rs 1 crore in pay in 2018, but an equal number got less than Rs 10 lakhs.

Size matters

The survey says that big companies typically pay more than the smaller ones do. The median CEO pay in FY18 was Rs 10.7 crores amongst the BSE 100 companies, Rs 4.6 crores amongst mid-caps, and Rs 4.2 crores in small-cap firms.

Companies with revenues of over Rs 50,000 crore pay their CEOs Rs 12.4 crores at the median as compared to Rs 4.1-5.6 crores in the lower revenue bands. Similarly, executive pay jumps when net profit crosses the Rs 2,500 crore mark indicating that it is strongly correlated with a company's revenue and net profit.

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Pay Trends

The report threw some interesting points. It says that India-focussed companies pay more than MNCs. Contrary to expectations; the MNCs do not seem to offer the biggest pay packages, although they do out-compete others at the CMD level.

The BSE 100 companies are the best paymasters as the median in these firms is 2 times more than that in small caps. Outward-oriented Indian firms tend to pay their CEOs/MDs and CSs more than other types of firms.

Sector-Wise Segregation

The report claims that the Executive Chairmen earned the most in the Pharma/Healthcare sector with a median payout of Rs 11.8 crores last year. CFOs and CSs working in this space earned more than their peers in other sectors. Where a CFO earned Rs 2.5 crores, a CS earned Rs 79.8 lakhs at the median level.

However, the IT and ITeS industry has the highest-paid CEOs getting between Rs 10.1 to Rs 12.7 crores.

The services sector, on the other hand, has the highest-paid WTDs who pocketed Rs 6.9 crores last year.

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Gender Disparity

The report also highlights the gross underrepresentation of women in public and private sector companies. Among executive positions, the female representation ranges from 2-3 per cent at CEO/CMD level to 10 per cent at the CFO and CS level in the private sector. It is even lower in the public sector at 6-8 per cent.

Women make up just 370 of the 2,978 individuals employed at top-executive and board positions in the companies (surveyed in the report) in FY18, an abysmally low number.

The glaring point underscored in the report is that women are entirely missing from certain size/category combinations. There are no female CFOs amongst the BSE 100 firms (covered in this study), and no female CMDs amongst small-cap companies.

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