News Release

Scarcity of holistic CEOs to push CEO compensation north

TrendofcrosssectoremployabilityofCEOscoupledwithscarcityofholisticCEOstodrivethewar forCEOtalent CEOcompensationatlarge,complexorganizationshascrossedtheINR7croresmark GreaterfocusonlinkingperformancetoCEOcompensationreflectedinhigherproportionof shorttermvariablepayandevolvingprevalenceofLTIs Benefitshavebeenonadecline,withchemicalssectorat16%ofCTCandtransportationat 6%ofCTC New Delhi/Mumbai, February 22, 2012: Global management consultancy Hay Group released the Top Executives Compensation report today, revealing that the average CEOs compensation in India has crossedtheINR2crores/USD400,000mark,onacosttocompany(CTC)basis. The study also shows that compensation is pegged to be more than INR 7 crores / USD 1.4 million at larger,morecomplexorganizations.Forthenextleveloftopexecutives(excludingtheCEO),theaverage compensationisaboveINR1crore/USD200,000,onaCTCbasis. TheTopExecutiveCompensationReport20112012featuresinsightsfromabout87organizationsacross sectors, analyzing compensation practices of top executives CEOs, their direct reports, and heads of businessesaswellasfunctions. Sridhar Ganesan, Rewards Practice Leader, Hay Group India, comments, The Indian CEO market has always seen a large pool of operationallyexcellent CEOs, but a constant scarcity of managing businessCEOshasdrivencompensationhigh.Compensationisexpectedtofurtherspiralupwardsowing totheincreasingcrosssectoremployabilityofCEOsthenewbreedofLateralCEOs.Instancessuchas globalcementmajorrecruitinganIndianinvestmentbankerastheCEOofitsIndiaoperationsandheadof Indian manufacturing companyjoining an IT companytolead its Manufacturing vertical, point tocross sectormovements.Thisbroaderlandscapeofopportunities,coupledwiththescarcityofholisticCEOs, willdriveexecutivecompensationnorthwards. Hefurtheradds,ThisalsohasimplicationsonthenextlineoftopexecutivestheaverageCEOssalaryis 2.6timesthatoftherestoftheexecutivepopulation,intermsoftotalCTC,excludinglongtermincentives (LTIs). However, there is very little total compensation differential between top executives across core and enabler functional roles. Reward philosophy driving business accountability as a top team rather thanafewstakeholdersisheretostay. (Table1)

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Table1

CEO salaries are 2.7 times that of Core Business Roles

CEO salaries are 2.5 times that of Business Enabler Roles

Core Business Roles

CEOs

Business Enablers Roles

Note: CoreRoles(e.g.HeadSales&Marketing,HeadofManufacturing/Operations,BusinessHeadsetc) EnablerRoles(e.g.HeadHR,ChiefInformationOfficer,HeadR&Detc)

Anothermarkedtrendisthegrowingfocusonperformance,leadingtoamorepronouncedvariablepay componentinoverall compensation. ThestudyfindsvariablepayasapercentageoffixedCTCtobein therangeof15%to30%.TheperformancefocusalsoleadstoagrowingtrendofLongTermIncentives, forbothCEO/MDlevelsaswellasOtherExecutives,withstockoptionsbeingthemostprevalentvehicle. (DetailsinTable2) Table2 Another trend isthatbenefits have been on a decline, as organizations are looking at cash as an important element of compensation. (DetailsinTable3)

80% 70% 60% 50% 40% 30% 20% 10% 0% StockOptions Restricted Stock Performance OtherLTIPlans Plans 8% 7% 28% 36% CEO/MD OtherExecutives 12% 11% 68% 61%

Hay Group

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Table3

Covering87organizationsinIndiaacrossthesectorsofChemicals,BasicResources,OilandGas,FMCG, Retail, Construction and Materials, Industrial Goods and Transportation, the Top Executives Compensation Report is designed to enable organizations to understand prevailing compensation practices and trends, and assist them in formulating marketaligned and businessmodel affordable compensationtotheirTopExecutives. Ends
Notes to editors Please note: these findings should be credited to global management consultancy Hay Group, and not Hay or Hays, which are separate and unrelated organisations. For further information: Miss Nidhi Mehra M: + 9818331654 E: nidhi.mehra@haygroup.com About Hay Group Hay Group is a global consulting firm that works with leaders to turn strategies into reality. We develop talent, organise people to be more effective, and motivate them to perform at their best. With 85 offices in 49 countries, we work with over 7,000 clients across the world. Our clients are from the public and private sector, across every major industry, and represent diverse business challenges. Our focus is on making change happen and helping organisations realise their potential. For more information, please visit www.haygroup.com/in

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