India’s executive compensation landscape is evolving, and Abhay Bhutada has emerged as the highest-paid professional for FY24, with a total compensation of Rs 241 crore, including stock options. Bhutada’s earnings have set a new benchmark, surpassing the previous record of Rs 221.5 crore held by L&T’s A.M. Naik. His payout marks a significant shift in India’s corporate pay structure, where performance-linked incentives are becoming more prominent.
For finance experts, this development is noteworthy as it highlights the increasing use of stock options as a means of rewarding top executives. A VCCircle analysis shows that six out of the ten highest-paid directors of public listed companies are professional executives, indicating a move away from promoter-led pay structures.
Tata Sons’ N Chandrasekaran is another prominent name on the list, securing the second spot with a pay package of Rs 135.3 crore—a 20% increase from the previous year. This is the second consecutive year that Chandrasekaran’s compensation has crossed the Rs 100 crore mark, underscoring his influence in Tata’s pay policies. Meanwhile, Thierry Delaporte of Wipro earned Rs 167 crore, more than double his previous year’s compensation.
These figures indicate a broader trend in the industry, where stock options are becoming the primary mode of rewarding top executives. Unlike traditional salary structures, stock options align the interests of executives with those of shareholders, making them an effective tool for driving performance. As companies grow and mature, they are increasingly turning to professional managers rather than promoters to lead the way.
PolicyBazaar’s Yashish Dahiya is another example of how stock options are reshaping executive pay. In FY22, Dahiya set an unprecedented record with a compensation package of Rs 613.8 crore, largely driven by stock options. His pay package is unique because he did not draw a traditional salary that year. Instead, his earnings came entirely from exercising stock options, making it a standout case in the history of executive compensation in India.
Also Read: Who is Abhay Bhutada?
Promoter-directors like Hero MotoCorp’s Pawan Munjal and Sun TV’s Kalanithi Maran have historically topped the pay charts, with annual compensation in the range of Rs 80-85 crore. But the rise of professional managers in the top earners' list signals a shift toward a more performance-driven approach.
This trend is not limited to public companies. Several privately held firms and Indian units of multinational corporations are adopting similar models. Executives heading these units often receive a large portion of their pay through stock options, aligning their compensation with global standards.
This evolution in pay structure is not only a sign of maturing corporate governance in India but also an indication of how companies are redefining the value of top talent. Stock options, which were once a lesser-known component of executive pay packages, are now taking center stage. A major reason for this shift is that they align executives' long-term interests with company growth, encouraging leaders to think beyond just short-term gains. As the industry becomes more competitive and interconnected globally, Indian firms are being pushed to adopt similar practices to attract and retain top talent.
The shift towards professional managers dominating the top-earners' list is also seen as a response to increasing pressure on companies to deliver sustainable growth. Promoters, who have historically occupied these positions, are gradually stepping back to let professional executives take the lead, ensuring that companies are better equipped to handle the complexities of modern business environments. This is particularly true for firms that are expanding their footprints globally and need a professional touch to manage diverse portfolios and international operations.
The prominence of stock options is also being driven by bullish market trends. During periods of market growth, the value of these options can increase significantly, turning them into a lucrative reward for executives. This was clearly seen in the case of Yashish Dahiya, whose FY22 compensation package of Rs 613.8 crore is unlikely to be surpassed anytime soon. His pay, derived almost entirely from stock options, serves as a testament to the potential of this form of compensation.
For companies, stock options provide flexibility in rewarding top performers without immediate cash outflows. They also serve as a strong retention tool, as executives are more likely to stay with the company until they can fully realize the value of their options. This aligns with global trends, where stock options account for around 60% of top CEO pay in major markets.
In conclusion, Abhay Bhutada’s salary for FY24 is more than just a headline figure—it’s a symbol of the changing dynamics in India’s corporate pay structure. As stock options and performance-linked incentives become more prominent, the traditional model of promoter-led compensation is giving way to a more performance-driven approach. This evolution is likely to continue as companies strive to attract and retain top talent in an increasingly competitive landscape.
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