The current economic slowdown, especially due to the coronavirus pandemic, has made its effect globally. Despite the gloom, more and more Indians are rising as CEOs of global companies, and with such positions, money is rolling in. The year 2019 witnessed 22 new CEOs joining the prized Million Dollar Club, as per Times of India Business report.
In 2018, India counted 124 CEOs earning salaries of Rs 7 crore and above. The year 2019 saw an increase of 18 per cent, the total number rising to 146 with the average annual compensation at Rs 16.8 crore.
How do you hire a CEO?
No. The incentive of profit and gain drives every business, and everyone associated with the business, including employees, has a stake in ensuring both the profit and benefits improve every year. A gain may be tangible or perceived. A profit is definitive and measurable.
An employee works for the compensation he earns at the end of each month, and failure to perform could cost the person the job. That’s the worst-case scenario for an individual employee.
A CEO, on the other hand, carries a lot of responsibility, which other employees do not. The CEO is responsible for steering the company through good and bad times and has to deal with evolving pressures daily.
Beyond these responsibilities, the CEO is also under pressure to meet Corporate Social Responsibility objectives and keep up public relations with all stakeholders. The CEO remains under constant pressure to balance the shareholder interests with those of the business, as both are not always aligned.
The shareholder eyes the share value, but the business may demand actions by the CEO, which may bring down the share value of the company based on prevailing market conditions. It could result in the board and shareholders losing confidence in the CEO.
The CEO is also held responsible for the actions of subordinates down to the lowest level. There are several known cases of inappropriate action by a staff member where the CEO was held accountable and subsequently axed.
Therefore, a CEO’s compensation should not be viewed in comparison with the average salary of employees of that firm.
The Top 10 CEOs leading the Million Dollar club in India are:
- Kalanithi Maran, SUN TV
- Kavery Maran SUN TV
- Pawan Munjal, Hero MotoCorp
- Sajjan Jindal, JSW Steel
- Murali Divi, Divi’s Lab
- HM Bangur, Shree Cement
- Onkar S Kanwar, Apollo Tyres
- PR Venketrama Raja, Ramco Cements
- Ajay Srinivasan, Aditya Birla Capital
- Neeraj Kanwar, Apollo Tyres
Strength of Million Dollar Club Members for different years:
Total compensation paid to CEOs in 2019: Rs 2,457 crore
Average CEO Compensation in 2019: Rs 16.8 crore (2018: Rs 17.4 crore)
Professional CEOs: 85
Promoter CEOs: 61
How are the CEOs making this kind of money when the economy is down?
CEO compensation is a matter of debate across the world and will remain so going forward. A CEO’s salary is compared with the average salary of employees in that company, and the apparent gap causes a lot of angst among those within the company and outside of it.
It is the company board that decides the CEO compensation, and the figure is arrived at after evaluating the individual’s achievements, risk and responsibility before determining the rewards.
The board of directors represents the investors and is responsible for the overall performance of the firm. The CEO is the person entrusted with carrying out the goals and objectives set by the board in consultation with the CEO.
One of the crucial parameters in deciding CEO compensation is the addition to the share value of the firm. When shares are high, investors make money, and everyone seems happy, even if the business turnover does not increase. The CEO gets rewarded.
It is the primary reason why 22 Indian CEOs have managed to make an entry into the Million Dollar club despite global headwinds. Despite poor year-on-year sales, low offtake by distributors and retailers, and a shrinking workforce, the stock markets in India have risen to record levels.
It means a large number of companies witnessed a rise in their share value in a slow economy, and this means a large number of shareholders got richer.
The shareholders, through the board of directors, have rewarded the CEO despite the pain felt by other stakeholders like employees who received lower or no salary hikes or lost their jobs, and those directly or indirectly associated with the company such as vendors, suppliers etc.