CEO’s take a Salary Cut in India; Bracing Up for More Such Cuts

CEO Salary Structure and Salary Cut in India

Given the increasing uncertainties in an increasingly volatile market it has become difficult for companies to continue with their commanding salaries, particularly at a time when cost cutting is the need of the hour. While companies are bracing up for more difficulties, a pay freeze across the top and middle level management can help companies rein in costs and at the same time send the message across to all the employees. If the situation worsens, employees will be prepared to receive the news of a pay cut.

Infosys cut the compensation of SD Shibulal, a founding member, by 30%, compared to a salary a year ago. Other senior level members including chairman emeritus N. Narayanamurthy, have taken a cut in their pay packages. This development has a parallel in the year 2008, when the salary of board members was cut by 60%.

 CEO Salary Structure

 Indian salary structures

Indian salary structures

“This is the trend is almost all major software companies. Few companies which haven’t taken recourse to this developing trend are seriously contemplating implementing it in the months ahead”. The gain from the depreciation of the rupee has been offset with the falling market conditions.

According to Nasscom, growth in the fiscal year 2012-13 is expected to hover between 10 to 14 percent. Analysts, however, believe the figure is inflated.  Sensing this, even better placed companies are gearing up to meet a possible economic catastrophe.

Analysts are of the view that since most IT and ITES companies in India are service based compensation of founding and top level members is proportional to the profits earned. Some analysts say those who have got a whopping rise in pay during good times, need to accept a pay cut during rainy days. This rule, however, does not apply in product companies because the market dynamics of such companies are vastly different. “Most CEO’s are not complaining because that’s how the industry works” Sais a senior executive of a recruitment agency.

The developments are perhaps an outcome of the lessons learnt from the 2008 crisis, when people were outraged by high CEO salaries – when companies did not deem it necessary to set an example by leading from the front.

The CEO’s, however, aren’t complaining. They are just biding their time for they know this is just a passing phase.

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