Institutional EYE

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CEO Pay Sector Analysis: Automobiles

April 17, 2018

 

This is the time of the year when boards are called upon to fix pay levels of its members for the coming financial year. This series on CEO pay, compiled by IiAS using data from comPAYre, IiAS’ cloud-based pay-versus-performance tool, is aimed at sensitizing boards on the remuneration trends across the market, as a basis for determining appropriate pay structures. This fourth piece in the series is focused on pay levels in automobile companies.

 

The automobile industry is home to some of the highest paid chief executive officers in India Inc. Four out of every 10 CEOs earned at least Rs.100 mn in the last fiscal while the ratio of the top executive pay to the median employee salary is over 100 times. The following charts detail how CEO pay in the auto industry compares with the rest of India Inc.

 

Exhibit 1: Median pay in sector

 

 

The median remuneration in the sector is significantly higher than the S&P BSE 500. Also, there is a wide disparity in the pay for CEOs and that of other EDs.

 

 

Exhibit 2: CEO pay to median employee pay (x)

 

 

 

 

The CEOs in the sector draw remuneration amounting to more than 100 times of that of the median employee pay.

 

 

 

 

Exhibit 3: Pay levels of 5 highest paid CEOs in sector (Rs.mn)

 

 

 

Almost 40% of CEOs in the sector were paid more than Rs.100 mn in FY17.

 

 

 

 

Exhibit 4: Fixed vs Variable Pay (%)

 

 

 

The pay mix in the sector is better, with a higher proportion of variable pay. However, only one CEO in the sector was granted ESOPs in FY17.

 

 

 

 

 

Exhibit 5: Board Compensation as % of Profits

 

 

 

 

The aggregate board compensation, as a % of net profits, is significantly higher than the rest of the market.

 

 

Exhibit 6: CEO Pay Growth in sector (%)

 

 

 

 

In the sector, the CEO pay levels in the last five years have not been aligned to performance.

 

 

 

 

 

Exhibit 7: Number of Promoter vs Professional CEOs in the sector

 

 

 

There is high promoter presence in the sector with more than 70% of the CEO posts being held by promoters.

 

 

Exhibit 8: Median pay of Promoter vs Professional CEOs in the sector (Rs.mn)

 

 

 

The pay for professional CEOs in the sector is less than half of that of promoter CEOs.

 

 

 

 

Exhibit 9: Gender Mix in the sector

 

 

 

There is very low representation of women directors in the sector – only three women executive directors are present across 31 companies.

 

 

Disclosures:

Data has been sourced from annual reports for the S&P BSE 500 companies and compiled using IiAS’ proprietary pay analytics platform, comPAYre

Data pertains to CY2016 or FY2016-17 (depending on financial year-end for respective companies)

PSUs have been excluded from the analysis

Fair value of stock options granted has been included while calculating overall pay

The pay growth chart pertains only to directors who have been on the board for the past five years

 

 

Disclosures:

  • Data has been sourced from annual reports for the S&P BSE 500 companies and compiled using IiAS’ proprietary pay analytics platform, comPAYre

  • Data pertains to CY2016 or FY2016-17 (depending on financial year-end for respective companies)

  • PSUs have been excluded from the analysis

  • Fair value of stock options granted has been included while calculating overall pay

  • The pay growth chart pertains only to directors who have been on the board for the past five years

 

A modified version of this report was published by Mint on 16 April 2018. You can read the earlier reports by clicking the links below:

Part 1: Indian CEO salaries outpace performance

Part 2: Bridging the pay gap

Part 3: CEO Pay Sector Analysis: Private Banks

 

For full report please, click here

 

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