CXOs from the industrial and manufacturing sector ruled the million-dollar compensation club in FY23 with 35 executives from this sector across BSE200 companies earning more than Rs 8.2 crore, or $1 million, compared to 31 in FY22.
Top bosses in the financial services sector came in second, followed by those in automotive and pharma sectors, respectively, showed a study conducted for ET by executive search firm EMA Partners India.
Experts said the number of highly paid executives in the industrial/manufacturing space is partly a function of the size and scale of these organisations. Some of these companies are like conglomerates in themselves and over time, gaps in leadership pipelines have driven up compensation.
Financial services, on its part, has been heavy on equity compensation over the years.
For the purpose of the study, the compensation includes exercised stock options, and the data has been sourced from the annual reports of BSE 200 companies. The study looked into the number of CEOs and CXOs earning over a million-dollar salary (over Rs 8.2 crore with the rupee pegged at 82/$). A total of 179 CXOs made it to the list, as reported by ET earlier.
“The industrial and manufacturing sector over the years has gained significant scale but at the same time, has been severely constrained for good talent at the entry level,” said K Sudarshan, managing director of EMA Partners India. “The sector has also seen erosion of talent in the middle layer. This has over time created gaps in the leadership pipelines across the board and has resulted in increased compensation as talent pools have narrowed down at the top,” he said.
There is a clear challenge at the top in industrial and manufacturing in terms of supply. Plus, since there isn’t regulatory oversight on compensation in the manufacturing and industrial sector, the number of million-dollar CXOs will only go up faster in the sector, Sudarshan added.
For financial services and pharma, factors such as high ESOPs and a limited talent pool are playing a part in the high salaries that CXOs command.
“Financial services – more specifically banking – has been heavy on equity compensation over the years, so perquisite income will show up in compensation upon exercise of options. That is the reason you see more millionaires in financial services under the professionals’ category,” said Anubhav Gupta, managing director of Exec-Rem, a specialist executive compensation advisory firm.
In the case of the pharmaceutical sector, Gupta said, considerable revenue comes in from outside India and senior talent availability to manage global operations is limited. “This also results in compensation at the higher end of the spectrum,” he added.
Amit Tandon, managing director of proxy-advisory firm Institutional Investor Advisory Service India (IIAS), said the highest number of million-dollar CXOs in the industrial/manufacturing sector companies is also a function of the distribution of these large companies in the BSE-200.
Otherwise, in general, people from knowledge-based companies tend to be paid higher than people in manufacturing businesses. So, IT, software and banking should, other things being the same, have a higher percentage of high earners overall, he said.
“As ESOPs form a large part of the compensation, the sectors where the share price performance has been relatively better, will see a higher percentage,” Tandon said.
Million-dollar CXOs: the sectoral spread
| SECTOR | Number of million $ professional CXOs | Number of million $ promoter CXOs | Total Number of million $ CXOs |
| Manufacturing/Industrial | 15 | 20 | 35 |
| Financial services | 23 | 4 | 27 |
| Auto | 10 | 10 | 20 |
| Pharma | 6 | 13 | 19 |
| IT, ITES, Software Services | 17 | 0 | 17 |
| FMCG, Consumer, QSR and Food services | 14 | 0 | 14 |
| Real estate/Infrastructure | 13 | 1 | 14 |
Source: EMA Partners India
