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How many zeros in that?

Last years financial crisis hit senior executives where it hurt the most their wallets. Still, Business Indias list of the countrys top earners scaled new heights
e were wrong. While compiling the list of Indias highest paid executives last year, Business India found it difficult to believe that Indian promoters would pay themselves less in a slowdown. downturn or no downturn, the highest salaries will see little difference next year, was our confident, if cynical, prediction. Boy, were we off-beam. Not only did some promoters take significant pay cuts, a few even awarded themselves zero salaries for 2008-09. The most talked about downshift came from the big daddy of India Inc himself: Mukesh Ambani. A few weeks ago, Indias richest man voluntarily reduced his overall compensation by 66 per cent from Rs44 crore in 200708 to a self-imposed limit of Rs15 crore for 2008-09. But three weeks before his elder brothers personal example of moderation took him off Business Indias list of the 10 top earners for the first time since the survey started in 2002, Anil Ambani had already walked the talk he took no salary or commissions for 2008-09 from the five listed companies he heads. Of course, at these levels, no salary doesnt mean no money: the younger Ambani has moved to the top of the list of Indias highest paid, thanks to the Rs52 crore he collected in 2008-09 as commissions for the previous year. Not only is that a new high for the listing, it is also the first time Anil has edged ahead of Mukesh. The Ambani brothers werent alone in their austerity, although they are in a class of their own when it comes to scale. Wipro chief Azim Premji reduced his annual compensation by 10 per cent, even as pay packages for the groups senior executives went

up. (Incidentally, at Rs2 crore and more, Suresh Vaswani and Girish Paranjpe already earn more than Premjis Rs1.99 crore). Madras Cements P.R. Ramasubrahmaneya Rajha, Onkar Kanwar of Apollo Tyres, Hindustan Constructions Ajit Gulabchand, JSW Steels Sajjan Jindal, Bharat Forges Baba Kalyani, J.C. Sharma of Sobha Developers all took pay cuts in either salary and/or commissions and performance bonuses. Monthly cheques were lighter by 25 per cent for the chief executive and operational heads at Jet Airways and the top bosses at NIIT; senior executives and heads at the B.K. Modi-controlled Spice Group also reportedly saw drops in their total compensation, ranging from Rs5 lakh to Rs25 lakh; and variable pay was either dropped or slashed for top management at a number of companies, including Infosys and ICICI Bank. Last year, many managers at senior levels took pay cuts, as did some large owner-managers, agrees P. Thiruvengadam, senior director, management consultancy

services, Deloitte Touche Tohmatsu. As in previous years, the top earners in India are promoter-managers: 64 of the 100 highest paid executives are either the controlling shareholders or members of the family that started their companies. For many of them, the lions share of their earnings comes not from salary, but from corporate results-linked commissions and bonuses. Madras Cements Rajha earned just Rs12.21 lakh last year; the rest of his earnings of Rs28.28 crore was from commission. Similarly, more than Rs20 crore of Naveen Jindals earnings of Rs28 crore is from commission. There were notable exceptions, of course: the Marans, Sunil Bharti Mittal and Malvinder Singh took no commission at all. And while these numbers appear huge to the average salaryman, theyre almost pocket change compared to what some of these ownerexecutives could potentially earn and to what they pocket as (tax-free) dividends. The Ambanis have a 49.03 per cent stake in RIL, which this year

TOP 10
Rank Name Company Salary 09 (Rs lakh) 5204.20 3708.00 3708.00 2871.43 2827.93 2371.83 2089.66 2073.31 2002.94 1979.28

1 2 3 4 5 6 7 8 9 10

Anil Ambani Kalanithi Maran Kavery Kalanithi P.R. Ramasubrahmaneya Rajha Naveen Jindal Malvinder Singh Sunil Bharti Mittal Vivek Jain Gautam Adani Brijmohan Lall Munjal

ADAG GROUP SUN TV SUN TV MADRAS CEMENTS JINDAL STEEL & POWER RANBAXY BHARTI AIRTEL GUJARAT FLUORO ADANI GROUP HERO HONDA

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The people minting money

declared a dividend of Rs13 for every share, as well as a bonus share issue: thats more than Rs1,000 crore in dividend to the companys promoters. Sun TVs Kalanithi Maran owns 77 per cent of the southern-based media group, while Premji holds 79.32 per cent in Wipro. Even if youre not a promoter, it would still pay to work in an Indian company. In the past decade or so, compensation levels in Indian companies have come on par with, and in some cases outstripped, multinational levels. Thats only fair, according to HR consultants. The CEO of an MNC in India is just a country manager, says a top recruiter. Consider the jobs in terms of scale, span, strategy, the level of freedom in decision-making and individual growth prospects theres no comparison at all. The size of the role and the size of the pay cheque arent the only advantages of being part of the top team at an Indian company. Salary structures are fairly similar, but differences show up in benefits. Some Indian companies offer excellent retirement benefits, which become an important consideration for people in their 50s, adds Madhav Sharan, regional market leader of the industry practice, Asia Pacific, at executive recruitment firm Korn/Ferry International. Multinationals still score higher

ometimes the more interesting names on a list are the ones that arent on it. And while its difficult to authenticate information on those that didnt make the list of highest-paid executives, anecdotal information is often more interesting than fact. Take Cyrus Poonawalla, CMD, Serum Institute, for instance. With a net worth of $1.5 billion, the horse-racing enthusiast recently admitted in an interview that one of the reasons he did not take his company public was that the corporate governance laws a public company is under are stricter and it would imply a constraint on his passions planes and cars. Poonawalla is perhaps among the few who admit it, but there are several other owner-executives of private companies who debit their lifestyles to the firm. An open secret is the doings of a public company thats Rs6,000 crore deep in debt, but which multiplied its chairman and managing directors salaries 10 times, funded Rolls-Royce cars and Rolex watches for their families and even sponsored a high-profile fashion event recently. Not everybody is that lucky. For the main part, salaries didnt take a hit last year although the MD who took a 40 per cent hit in his $800,000 pay package is now an urban legend but the meltdowns impact on bonuses may yet continue. Foreign I-bankers, whose bonuses are typically multiples of their annual fixed salaries, are yet to recover from the 75 per cent cut they faced last year. And Sunit Mehra, managing partner, Hunt Partners, a recruitment firm, warns that the worst is yet to come. Last year, the bonuses were just about okay because the downturn hit towards mid-year. This year will be even worse, he says. The exception: Citi, which has apparently been handing out mid-cycle increments. Even private equity (PE) players (usually the best paid, those who manage $1 billion or more making $1 million or even more) received less-than-lavish packages at the top levels. According to a 2009 study of PE compensation by Hunt Partners, most senior PE professionals got 1015 per cent less than usual, while those at

associate and senior associate levels were less affected. The lower salaries were because of fewer deals and no income from carry, since no disinvestments were made. Not that the big numbers were completely absent. Shweta Jalan is rumoured to have been offered $1 million to move from ICICI Ventures to Advent; Sanjay Nayar is said to have made the shift from Citi to KKR for $5 million, while fund managers at Templeton and Fidelity were reportedly paid in excess of Rs2 crore last year. Typically, Indian PE firms pay less than big global names, but Archana Hingorani, CEO and MD, IL&FS, made Rs4.17 crore last year, while Luis Miranda, CEO, IDFC PE, reportedly took home Rs2.8 crore. That fits in with R. Sureshs belief. Equity fund managers are typically not affected at any stage of the boom-andbust cycle, says the MD of Stanton Chase International. What about private banks? The guidelines of the Banking Regulation Act arent specific, but the RBI has the right to scrutinise and even cap senior-level salaries at Indian banks. It used those teeth earlier this year and objected to the compensation decided for three senior bankers, including Shikha Sharma, who was joining Axis Bank as CEO. At Axis, Sharma will draw a salary of Rs1.25 crore in addition to ESOPs, car, telephone, provident fund, gratuity pay, official entertainment and a housing allowance of Rs48 lakh. Aditya Puri of HDFC Bank and Ramesh Sobti of IndusInd Bank apparently make similar amounts in base pay. Directorlevel employees at the newly-launched Axis Bank brokerage arm as well as Kotak make around Rs30-35 lakh, while those at nationalised banks like Union Bank dont earn more than Rs20-27 lakh (including performance-linked bonuses). The only saving grace is that Indian banks are generous when it comes to stock options. Foreign banks arent subject to any RBI-imposed limits and it shows. Deutsche is said to be the best paymaster MD & CEO Gunit Chadha reportedly makes $6-8 million, while Standard Char-

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tered brings up the rear. Newer banks like Barclays and CSFB upset the industry average by paying outrageous sums to attract the best in the industry, says a foreign bank source. Ravinder Singh moved to Barclays as director for Rs90 lakh, double what he was making at BNP; Sunit Jain made the switch, also as director at Barclays, for Rs95 lakh, up from the Rs35 lakh that Kotak gave him. But banks and financial services have a norm that employees should earn for the company 3-5 times their salaries, not always an easy task.
SANJAY BORADE

so that 40-50 new recruits, who were initially to join in May-June 2009 and had been pushed back to January-March 2010, have now been rescheduled to start between October and December 2009. Unfortunately, advertising agencies are yet to see the light at the end of their tunnel. The past six months have seen a 10-15 per cent decline in revenues across the industry, resulting in no salary increments for fiscal year July 2009-June 2010. While the average CEO/MD in advertising makes about Rs2 crore, those on global boards such as Piyush Pandey and
PALASHRANJAN BHAUMICK PALASHRANJAN BHAUMICK

Luis Miranda

Gunit Chadha

Adil Zainulbhai Prasoon Joshi can make close to Rs5 crore, exclusive of stock. Interestingly, the star patrons of advertising Coca-Cola and Pepsi had a bonanza year, according to an industry insider, with hefty bonuses that are typically linked to various key performance indicators (KPIs) and salary increments. Senior executives at other FMCG companies, such as Reckitt Benckiser, Procter & Gamble and Nestl, too had a good year, earning up to Rs3 crore. FMCG companies have been less affected through this downturn with more stable compensation levels, says Arjun Srivastava, leader of the consumer practice at executive recruitment firm Egon Zehnder. Many of them had their best years, he adds. The difference is that senior-level compensation has become more performance-linked. The annual variable component has become a larger portion of total compensation, which is the natural thing for organisations to do, says

The compensation structure at consultancies is different. Salaries are pegged to global standards (at partner level and above), and bonuses are a smaller percentage (around 20 per cent) of total compensation. Director-level pay at McKinsey, Boston Consulting Group and Bain is said to be close to $1 million (including a share of revenue), while some long-time directors, like McKinseys India head Adil Zainulbhai, may make several times that amount. There were reportedly no salary cuts last year, but many consultancies put a freeze on salaries and slashed luxuries like business-class travel, team dinners at five-star hotels and companysponsored retreats. According to sources at McKinsey, the sitting on the beach (unstaffed employees) rate was 25-30 per cent last year, up from the average 5 per cent. The outlook improved after the general elections in April and more companies expressed their willingness to invest afresh: so much

Srivastava. What did get affected was the bonus payout at MNCs (since it is pegged to a worse-hit global standard), as well as stock options linked to performance, since the stock value has suffered. The dark horse in the compensation package race is the traditionally less-capitalistic, more recession-proof legal profession. According to a partner at a leading law firm, There has been an exponential growth in lawyer remuneration, in part due to an increased number of young people in the profession who are more moneysavvy and have brought some glamour back into the industry. While partners at law firms like Amarchand and Zia Mody make Rs10-15 crore, independent counsels often make more money. Harish Salve, allegedly Indias highest paid counsel, charges close to Rs50 lakh a day to appear in court (he apparently files an income tax return for Rs30 crore). And, if rumour is to be believed, RIL signed him on on a retainer of Rs25-30 crore for the gas dispute. Even others like Dushyant Dave, Mukul Rohatgi, as well as politicians like P. Chidambaram, Arun Jaitley and Abhishek Singhvi, used to charge Rs2-3 lakh for an appearance in the Supreme Court (they could make up to 10 such appearances on a good day). And with the maturing of the industry in India and an increase in the number of lawyers (from 600,000 in 2004 to 1 million in 2009), compensation structures have started changing, with greater variable components as well as inclusion of perks like foreign trips, childrens education, etc. Indias reluctant capitalism has yet again brought ostentatious compensation packages to the fore. While some companies are realising the difference between luxury and sheer excessiveness, they are probably the exception and not the rule. The question remains whether muted compensation packages are simply reactions to a lacklustre financial year and increased public outrage, or a premonition of commensurate, more conservative lifestyles. That said, we dont subscribe to governmental or moral policing of executive salaries; equilibrium is best achieved if left to the environment even if that means a few slips along the way.
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than Indian companies when it comes to selecting women for top jobs. Headhunters and HR consultants point out that the reason there are so few women in the list of top earners is because there are so few women at senior levels, not because they are paid less than their male colleagues. In family-owned businesses, there are fewer chances of women reaching the top. But look at the private banking sector there are so many women in positions of power, says R. Suresh, managing director of executive search firm Stanton Chase International. So high, so fast? You wont find Kalpana Morparia, Shikha Sharma, Naina Lal Kidwai, Vishaka Mulye, or Falguni Nayar in Business Indias list. The names in the following pages have been taken from the annual reports of listed public companies; under Section 217 (2A) of the Companies Act, 1956, all public company annual reports must include a statement listing every employee who earns above a prescribed amount (Rs24 lakh at present, up from Rs36,000 in 1988). The scale and range of our list would explode if we could include anecdotal information about unlisted companies the $2-billion packages (exclusive of stock) that heads of foreign banks reportedly earn, for instance. But we cant. When Business India first published its list of highest-paid executives in

2002, the cut-off level was Rs10 lakh. The list included 307 names with Dhirubhai Ambani leading the way at Rs8 crore. In 2008, the cut-off level was Rs24 lakh. At top slot was Mukesh Ambani earning nearly 20 times that figure; there were also 2,120 executives whose compensation packages were at least twice the prescribed limit. This year, there are 3,134 people on the list, all of whom earn at least Rs50 lakh; 1,000 earn over Rs1 crore. If this is what a slowdown looks like, I want one of my own. Part of the reason for the exponential growth in executive pay is economic growth, of course. As the economy and markets grew, C-suite

compensation merely kept pace. Even 15 years ago, it was possible to get a top-notch CEO with 20-odd years experience in sales and marketing roles and P&L responsibilities for Rs50 lakh a year (plus stocks and house) about 25 per cent of global pay for similar positions. Today, its not uncommon to see HR heads and CFOs pulling upwards of Rs1 crore. Some of the top executives in India are paid phenomenally well, enough probably to buy a small country or at least a good-sized village! laughs Boyden India president Dinesh Mirchandani. While some of this is due to artificiallyinflated demand, quality Indian talent, for the most part, is finally being valued at the level it deserves. But bubble economics also had a role to play. For the last decade or more, remuneration decisions have been driven by employee shortages, especially a dearth of top talent, says Sandeep Chaudhary, leader of Hewitts performance and rewards consulting practice in India. Beginning 2005, though, the demand for C-suite executives surged and every wannabe CEO not just Indian, but also expat and returning native who could check the required boxes on his rsum (line management experience, global exposure, P&L responsibility) suddenly had a better-than average shot at the top job. More importantly, he could demand and receive unheard-of amounts as compensation by promis-

Big-ticket dividend earners in India Inc

Name Company Promoter holdings # (%) 49.03 79.32 68.15 NA NA 63.71 77.00 39.38 Dividends received by promoters (Rs crore) 930 465 320 256 202 181 76 61 There is a lot of talk in India about high salaries and even higher commissions. These numbers, however, pale in comparison to the dividends some promoters get. It is a measure also of how closely held some large companies are. The adjacent list shows the big-ticket dividend earners in India Inc. Often companies in India are controlled through investment companies and trusts. So, it is not necessary that the dividend goes directly to the individual. Also, this is the promoter holding that could include other family members. This list is only indicative and not necessarily the highest dividend earners.

Mukesh Ambani Azim Premji Shiv Nadar Anil Ambani * Kumar Birla ** Dilip Shanghvi Kalanithi Maran Y K Hamied

Reliance Industries Wipro HCL Technologies ADAG Aditya Birla Group Sun Pharmaceuticals Sun TV Network Cipla

# All promoter holdings except HCL Technlogies (June 2009) are for March 2009 * Dividends from Reliance Capital, Reliance Communications & Reliance Infrastructure ** Dividends from Aditya Birla Nuvo, Grasim, Hindalco & Grasim

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ing exponential growth that eager boards didnt question too closely. For the two or three years prior to the meltdown, the paucity of relevant leaders, as well as general growth, resulted in the balance of power shifting in favour of executives, leading to some large compensation numbers that were often not in sync with the executives value proposition, says Preety Kumar, managing partner at global search firm Amrop India. Crash landing The Great Recession put paid to all that. While rank and file employees were laid off in industries ranging from textiles and chemicals to IT and financial services, senior management didnt escape unscathed, either and were not saying that just because we heard the gurgles as options went underwater. 2009 has been characterised by salary and hiring freezes, low attrition levels, cost containment, lower employee budgets on development/travel, lowest base salary increases, zero/lower bonus and long-term incentive programme (LTIP) payouts, declares N.S. Rajan, partner and national head, human capital, Ernst & Young. Across Corporate India, cost-cutting became the raison detre for most companies, beginning with payroll. For

perhaps the first time since liberalisation, salary hikes were in single digits and while many companies gave performance bonuses (probably because the expense had accrued to the balance sheet), the payouts were much smaller than previous years. Various surveys indicated that almost a quarter of companies in India planned to freeze wages in 2009. An HR trends report by Watson Wyatt in August reported that 40.8 per cent companies froze salaries for top management; where hikes were given, levels of increase at top management (5.3 per cent, against a budgeted 8.5 per cent) were much lower than those for senior and middle management (7 per cent and 7.8 per cent, compared to the planned 8 per cent). Studies by other HR consultancies help shore up the view that difficult though it is to believe top leaders were the worst affected by the meltdown. Ernst & Youngs Rajan points out that last year, India Inc witnessed the lowest-ever salary increases in the past five years, adding that level-wise analysis indicates lowest salary increases among the top management, mainly on account of lower bonus payouts. From the executives point of view also, voluntary attrition switching jobs, in manager-ese came down. Not only because there were fewer jobs to be had, in many cases, as companies put a freeze on hiring, but also because most peoples native caution kicked in. Recruiters point out that in several cases, job negotiations reached the offer letter stage which the senior executive used to negotiate a better package with his old employer. They didnt want to risk change at the time, even if the other offer was really good, explains a headhunter. Back to the future Consultants and top-level recruiters believe that as the economy picks up speed in 2010, companies will attempt to restore salaries to pre-meltdown levels. The Watson Wyatt report predicted an 8.5 per cent increase in salaries in India next year, compared with the average 7 per cent paid out in
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Can high wages kill an industry?

scalating turbine fuel costs, coupled with dismal economic conditions, may provide the three international carriers in India Air India and Indian Airlines (owned by NACIL), Jet Airways and Kingfisher Airlines with a politically correct justification for their Rs10,000 crore cumulative debt. But an equally responsible part of the aviation debacle is disproportionate compensation structures. NACIL has a wage bill of Rs3,300 crore (Rs1,400 crore of which was given as productivity-linked incentives or PLIs) for its 30,600 employees 20 per cent of its total cost. In comparison, Jet and Kingfisher paid 11 per cent of their total cost in employee remuneration and benefits: Jet a little over Rs1,400 crore for its 13,483 employees; and Kingfisher, Rs8,23.8 crore for 8,614 employees. According to industry sources, a senior captain at AI receives a compensation of about Rs6 lakh per month (base salary of Rs1 lakh, the rest in PLIs), whereas those at Jet and Kingfisher receive a little over Rs4 lakh a month. Indian Airlines pilots do not receive a fixed salary; they are paid on the number of hours travelled senior pilots make around Rs5,600 to Rs6,000 an hour, commanders make Rs4,500 per hour and co-pilots make around Rs2,000 an hour. Jitender Bhargava, ED, AI, was unequivocal about the comparison: Jet and Kingfisher are mere airlines, but AI is a

2009. The more optimistic Mercer India Monitor quarterly report estimates that pay will rise by 10.9 per cent next year, after going up 8 per cent in 2009. According to Hewitts annual Asia Pacific report, released a couple of weeks ago, India will lead salary increases in Asia Pacific, with average hikes in 2010 of 9.2 per cent, compared with 6.3 per cent this year. As industrial production and price indices become more stable, companies are becoming more positive, says Hewitts Chaudhary, adding, which is translating into willingness to invest in strengthening the value proposition to

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multi-faceted aviation company. We do all our aircraft maintenance in-house, they dont. That plays into our salary bill. Refuting a wage-cost comparison with foreign airlines he said, These airlines are under subsidiary companies, but at AI, everything is part of AI. When we develop our subsidiaries in a year or two, the number of employees will come down to 11,000 or 12,000. NACIL sources admit, however, that pilots are overpaid. The core lies in the

NACIL has reduced PLIs by 25-50 per cent for senior staff in the hope of halving the annual PLI cost, but general administration and ground staff PLI cuts were delayed. Similarly, Jet has cut allowances of trainer pilots by 25 per cent and revised perks offered to pilots. Also, entertainment allowances have been curtailed, while overtime payments and paid leave have been stopped. Jet will reportedly save Rs350 crore every month due to these savings. Kingfisher has also been on a wage-

inexplicable PLIs that NACIL pilots get for basic performance levels. Allegedly, these were never correlated to productivity, and AI set lower than industry standards to ensure that the staff got adequate PLI. The performance level of average annual flying hours was reduced from 3,055 hours to 2,300 hours under the PLI scheme. Some other parameters include on-time performance, average annual flying hours, operating margins, profitability and so on. Around 80 per cent of the PLI pie is reportedly split only amongst top management officials, engineers and pilots.

slicing spree. It has introduced a 20 per cent variable component in pilot pay depending on the hours he flies, cut pay of senior pilots, and slashed trainee pilot pay to a meagre stipend. The airlines are also phasing out expatriate pilots, who are paid sometimes 40 per cent more than their Indian counterparts. Kapil Kaul, India head for Centre for Asia Pacific Aviation (CAPA), says, The salaries of expat pilots in India are steep. They have risen from Rs2 crore to around Rs3.5 crore in the past five years. However, the salaries of other pilots and crew are not

very high, unlike other sectors of the economy... In India, salaries constitute 7-10 per cent of the cost of running an airline, which is very low compared to 30 per cent in the US and Europe. The redundancy is all-pervasive at NACIL it has 40 EDs alone. NACILs 200708 annual report states that about 600 employees get a salary of over Rs50 lakh, but there is no mention of any of the EDs or their salaries. Saroj K. Datta, sole ED at Jet Airways, was paid Rs9,422,400 in 2008-09 and the remaining 10 non-executive directors were paid a sitting fee of Rs20,000 per board/committee meeting. The past three years have seen a significant migration of senior executives from the aviation sector, primarily due to compensation mismanagement by HR departments. Other than the most recent case of Wolfgang Prock-Schauer, CEO, Jet, there is Ramki Sundaram, executive VP, Kingfisher Airlines (he was being paid Rs10,288,523 as of March 2008), who is now with Ivestec Bank (UK), and Carl Saldanha, CFO, Jet Airways, who has joined BPO FirstSource Solutions. Interestingly, few are from NACIL. The question arises: are Indian carriers fighting a losing battle? Foreign domination on international routes, crumbling infrastructure, mounting losses, competing with a government-run national airline, and managers going on strike... the situation is grim. But the glamour inherent in the industry will continue to lure even the brightest to enter the fray, with hopes of soaring.
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customers and employees. The rest of the region, meanwhile, will maintain its deathgrip on purse strings, the experts believe. Hewitt predicts that Indonesia will continue to have the most liberal paymasters after India, with expected hikes of 8.7 per cent in 2010 (6 per cent in 2009), followed by China (6.7 per cent, on the back of 4.5 per cent). The slowest gains in average salaries next year are likely to be in Japan, Singapore and Hong Kong 2.1 per cent, 2.6 per cent and 2.9 per cent, respectively. But even if Indian salaries do bounce back, dont expect a return to

the earlier, near-blind munificence. While salary structures at all managerial levels will see some change, CXO compensation is likely to be completely transformed. R. Sankar, executive director at PricewaterhouseCoopers, points out that as a general rule, the higher you go in the hierarchy, the higher your pay at risk. In India, compensation plans that incorporate short-term variable pay in the form of performance-linked bonus and long-term incentive programmes such as stock options and restricted stock grants are still evolving. At risk pay now accounts for over a third of total
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compensation for top and senior professionals. That may not seem like much compared to the 80 per cent variable-fixed ratio in the US and 60-70 per cent in Europe, but it is still several times higher than the 10-12 per cent of a decade ago. What is emerging is that people in top jobs are now willing to link a greater percentage of their compensation to the performance of the company, in addition to their own performance, says Oscar De Mello, country head for reward information services at the Hay Group. Hay Groups market remuneration report of October 2009 says that at the

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median level, there was an 11 per cent drop in top job base pay compared to October 2008. Cautions De Mello, This doesnt necessarily mean salaries were cut: it could mean companies had begun hiring at lower levels, or it could also point to an increase in the variable pay component. As it happens, the report shows that variable pay jumped to 38 per cent of total remuneration in 2009, from 28 per cent in 2008. Still, the range remains wide low variable pay component in buoyant sectors like knowledge management and pharma and just about 4 per cent in retail, higher (up to 50 per cent or more) in sectors with high people costs, such as banking, consulting, private equity and financial services. The scales are tilting in favour of variable pay, though, as companies find that not only does it help keep fixed costs down, but also increases the thrust on pay for performance. Padmaja Alaganandan, leader of the human capital business at Mercer, India, agrees. The culture of appeasement, which saw even mediocre talent getting disproportionate pay rises, has changed in the downturn. Differentiation will actually strengthen now, with premium on good talent and more of the increase taking place as variable pay. Show some skin That is also in line with the kind of pay reforms being advocated in the

West. Of course, the issue of executive compensation in India is very different. Not only is the scale of pay so different (in 2008, the average compensation of a Standard & Poors 500 company CEO was $10.8 million, compared to $242,402.32 for this list of highest-paid executives, not all CEOs, of course), but in many companies, C-level positions are occupied by owner-managers (which means no conflict with shareholder interests). Executive compensation is always a thorny issue. In a bad year, 100 people will stand up at a companys AGM and ask why the management is paid such large salaries. In a good

year, there will still be one person who will ask the question, but he will be shushed by the others, says Deloittes Thiruvengadam. Increasingly in India, there is a demand to be objective when deciding the rewards structure for business leaders. One option, then, is to let market forces decide whats fair and pay CXOs based on the nature of the business and the kind of person required for the job. What is the job? Typically, the top management of any company is expected to deliver results in the short term, set in place strategy and programmes for the medium term, and build effective teams and leaders over the long term. They have to manage the environment successfully and create shareholder value. Trouble is, there are very few people who can actually do all this. There is greater shareholder focus on saying, lets put science into deciding CEO salary, says Mercers Alaganandan. But its not easy to be objective talent dynamics make a difference and there is a high person premium involved in taking the decision. Kumar of Amrop India agrees. Often, for critical leadership roles, you can count suitable people on your fingers, she says. Regardless of how many zeros are finally tacked on to the pay cheques of top talent, it doesnt hurt indeed, it is imperative to ensure that the

There is a huge difference in executives' salaries in India and abroad. While the highest paid executive in India, Anil Ambani, had a remuneration of Rs52.04 crore ($11.04 million) in 2008-09, the highest paid executive globally, Aubrey K McClendo, took home $112.5 million in 2008. There are three Indian-origin men in the list of 25 highest paid men in the world: Sanjay K Jha of Motorola ($104.5 million, rank 2), Vikram Pandit of Citigroup ($38.2 million, rank 14) and Dinesh C Paliwal of Harman International ($30.4 million, rank 25). The highest paid woman executive in the world is Oracle president Safra Catz ($42.4 million). PepsiCo chief Indra Nooyi ranks No. 10 on this list with a pay package of $14.9 million in 2008.

Top 10 highest paid men in the world in 2008

Rank 1 2 3 4 5 Name Aubrey K McClendon Sanjay K Jha Lawrence Ellison Richard C Adkerson Bob R Simpson Company Compensation* Chesapeake Energy 112.5 Motorola 104.5 Oracle 84.5 Freeport McMoRan Copper & Gold 72.3 XTO Energy 53.5 Rank 6 7 8 9 10 Name Robert A Iger Lloyd C Blankfein Kenneth I Chenault Jon Winkelried Gary D Cohn

($ million) Company Compensation* Walt Disney 51.1 Goldman Sachs 43.0 American Express 42.8 Goldman Sachs 42.4 Goldman Sachs 42.3

Source: List published by Fortune and compiled by executive compensation research firm Equilar Inc. *Total compensation includes annualised base salary, discretionary and performance-based bonus payouts, the grant-date fair value of new stock and option awards and other compensation. Besides, other compensation also includes severance payments

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organisation gets the biggest possible bang for its buck. Aligning rewards with performance restructuring compensation so that a greater portion is linked to individual performance and tracking it through more frequent and vigorous appraisals is a no-brainer. The definition of performance and its measurement is not most consultants advise that companies need to look beyond the numbers. Beating budget is great, but how did you perform vis--vis the competition? What is the quality of the numbers you brought in will they help in sustained, incremental growth? Those are the questions boards need to be asking their top people, suggests a compensation consultant. Companies also need to watch out that targets arent so steep that they incentivise excessive risk-taking or even fudging numbers. The trick, then, lies in getting more management skin in the game encourage company leaders to own stock, either as a multiple of base pay or for a predetermined rupee value. Convert a significant part of pay into stock that vests only after a certain number of years and after predetermined conditions are fulfilled. Set in a place a holding period for the stock to prevent early sellout. Write in a clawback provision, where stock grants can be reversed and payouts can be taken back. Of course, there are no guarantees that these measures will ensure a bet-

ter return on talent. Indians tend to have short memories people will make the same mistakes. The solution to talent scarcity is not in higher pay that will put your economic model at risk, but in increasing employee engagement and looking for points of stickiness, says PricewaterhouseCoopers Sankar. Looking ahead What is in store for 2010? The demand for people will return when the good times return, declares Boyden Indias Mirchandani. Korn/ Ferrys Sharan explains how the job market will react next year: Over the next 12-18 months, companies will

be keen to pick up professionals who can help them with the next phase of growth, keeping costs down while continuing to build systems, processes, people and external networks. We expect companies to be willing to pay what it takes to get the right person on board, but also expect them to draw the line on anything frivolous. Thats the recruiters point of view. Heres our take on potential hot buttons in the job market. The infrastructure sector will see big spikes in compensation especially oil & gas and power as will pharma and perhaps even manufacturing. IT and banking will recover to a large extent, while telecom salaries will remain flat. Hikes at CXO level will be between 5 per cent and 10 per cent of base pay; budget for about a percentage point more at every rung down the ladder. If youre in retail, FMCG or even pharma, get used to the idea of separating your earnings into base pay and variable pay. Regardless of the sector, get used to the idea of smaller increases in base pay. And dont count on your willingness to move between cities to get you extra brownie points the focus will be on getting the job done, not on who gets it done. Oh, and one more thing no more sign-on bonuses and ESOPs tossed around like confetti. What if weve got it wrong (again)? You can read about it next year.
N MEENAKSHI RADHAKRISHNAN-SWAMI

Despite the furore over promoters of companies taking home money disproportionate to the rise in net profits, Business India has found out that for the top 10 highest paid promoters, this is not true. Only Naveen Jindal and Vivek Jain have treated themselves to pay hikes much higher than the increase in net profits.

Top 10 highest paid promoters in India in 2008-09

% change over last year Rank Name 1 2 3 4 5 Anil Ambani Kalanithi Maran Kavery Kalanithi P R Ramasubrahmaneya Rajha Naveen Jindal Net profit 47 19 19 -11 24 Remuneration 20 14 14 -11 67 Rank 6 7 8 9 10 Name Malvinder Singh* Sunil Bharti Mittal Vivek Jain Brijmohan Lall Munjal Pawan Munjal % change over last year Net profit -269 24 6 32 32 Remuneration 21 7 23 26 25

* Singh left Ranbaxy earlier this year

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