Revitalizing Sales Compensation - Aon

Parity (PPP) adjusted currency conversion rate. This would
translate into an approximate value of ` 9-11 crores. now
compare that with the median compensation of the CEO
of an Indian company (in a revenue range of USD 2-4
billion), and you would find the CEO pay to be in the
range of ` 5-7 crores.
Source: Aon Hewitt TCM Studies, OECD PPP Database 2011
Note: Figures represent Total Fixed Pay
There are two other interesting dimensions to this
story. The first is around how the CEO compensation
grows in India vis-à-vis other countries. At an average,
executive pay in India has seen a Compound Annual
Growth Rate (CAGR) of approximately 13-14% over the
last decade. In the same period, the average growth in
executive compensation across most Western economies
has been in the range of 1-3%. If we assume that growth
rates remain unchanged over the next five years, Indian
CEOs would earn greater than their Western counterparts,
albeit on a PPP basis.
The second, and slightly nuanced story, is around
how compensation is structured for executives in India vs
the Western world. Typically, Indian CEOs have between
45-50% of their compensation delivered through fixed
(and non-performance linked) elements of pay, while their
Western counterparts usually don’t have more than 20%
of their pay as fixed. If you apply these percentages to the
total compensation numbers, you will find that on a fixed
pay basis, Indian CEOs already make more than their
Western peers!
The Story You Need to Know
Let us now turn to the fundamental construct of executive
pay practices that our study and the subsequent analysis
threw up. Beyond this point, we will focus on the data as it
is and some of the stories behind the data.
10 www.aonhewitt.com/india
a. Executive Pay Levels Significantly Vary
by Industry
This year, our survey represented a similar pattern in
executive compensation differentials across industries
as we had seen in the previous years. While we kept
financial services out of this analysis on account of the
wide differentials in pay levels between different subsectors
under this industry definition, we found a variance
of about 160% between the median CEO pay across
the lowest and highest paying industries. Interestingly,
we found a combination of new and old – ITeS and
manufacturing – as the leading paymasters at the CEO
level across all industry definitions. We believe much of
it can be attributed to the fact that the ITeS business is
dominated by organizations that have a global footprint
and very often are also listed abroad. Thus, their approach
towards executive compensation management is different
from the way Indian Boards look at it. We noticed that the
manufacturing industry definition covered some of the
largest companies in the survey and therefore, it was not
surprising to find that pay in these organizations should
be higher than their peers. The manufacturing industry
also represents a host of companies that have larger global
aspirations and their executives are, very often, not just
responsible for the India operations.
It would be important to highlight that interestingly,
the width in compensation levels for the direct reports to
the CEOs across these industries was far narrower (~75%).
Source: Aon Hewitt Executive Compensation Study 2011-12
Note: Figures represent Total Fixed Pay (a summation of Fixed Pay,
Monetized Benefits, Annual Incentives and Long-Term Incentives)
b. CXO Pay Varies by Function
We found interesting patterns in CXO pay levels across
different functions. While it is intuitive that the Chief