India has double the number of CEOs with Rs 50 cr+ pay than five years ago

The percentage of chief executive officers (CEOs) and managing directors at Nifty 50 taking home more than Rs 50 crore in FY24 has doubled in the last five years.  

A report by Economic Times quoted a Deloitte study shared exclusively with them as saying that one out of every five, or 22 per cent, CEOs and MDs earned more than Rs 50 crore in the last fiscal year, compared with one out of every 10, or 10 per cent, in FY19.  

As per the study, in FY24, 30 per cent of the 10 promoter-incumbents, earned more than Rs 50 crore, compared with 27 per cent in FY19.  

Among the 31 non-promoter incumbents, 20 per cent earned over Rs 50 crore, 4 per cent more than those in FY19.

The study has analysed 41 of the Nifty 50 companies and did not include public sector undertakings (PSUs) and three others where there was no active incumbent, the MD had voluntarily relinquished compensation, or was on deputation from the holding company.

The Deloitte study further highlighted that the median compensation for Nifty 50 CEO surged from Rs 13.1 crore in FY19 to Rs 18.9 crore in FY23 and further to Rs 22.6 crore in FY24.  

Whereas, Nifty 50 promoter CEO pay, between FY23 and FY24, increased by 6.9 per cent from Rs 23.3 crore to Rs 24.9 crore.

What drove this increase?

As per the study, the 19.6 per cent year-on-year growth over FY23 in median compensation has primarily been driven by non-promoter CEO pay increases.

“CEO compensation in India, expressed as a percentage of revenue, is now comparable with that in the US," Dinkar Pawan, director, Deloitte India, said in the study report.

“Compensation levels are dictated by market supply and demand dynamics. We’ve observed even new large-cap CEOs commanding such pay packages,” Pawan further said.

The earning of the CEOs in IT services and heavy manufacturing companies continues to be the highest in India due to their size, scale of operations and their typically overseas location.  

In FY24, median Nifty 50 CEO pay at IT services companies was Rs 49.8 crore, while at heavy manufacturing companies, it was Rs 42 crore.

Nifty 50 auto company CEOs in FY24 got annual median pay of Rs 24.9 crore, consumer companies earned Rs 22.6 crore, pharmaceuticals - Rs 18.6 crore and financial services - Rs 17 crore).  

“CEOs in the Nifty 50 consumer and IT services industries have seen among the highest year-on-year increases in compensation at 67 per cent and 43 per cent respectively. These are largely driven by a sustained increase in share-based long-term payments and share price growth,” Pawan said.

The ratio of Nifty 50 CEO pay to median remuneration of employees has increased to 290 from 263 (FY24 vs FY23).

The total pay-at-risk component, tied to performance, within a Nifty 50 CEO’s package has gone up for non-promoter incumbents – 56 per cent in FY24 from 53 per cent in FY23. For promoter incumbents, a drop in profit-linked commission has resulted in a minor fall in variable pay–47 per cent in FY24 vs 49 per cent in FY23.

Beyond size, nomination and remuneration committees (NRCs) and boards consider additional factors such as location of the CEO, track record, scale of operations, expected growth and the cost of replacement while deciding pay, Pawan said.