After years as the poor relations, South Asia’s executives
now hold stock options, receive performance-related bonuses and earn decent
salaries. Paran Balakrishnan reports
How much are Asian executives worth? The answer ten years
ago would have been slightly more than a checkout person at Tesco or Wal-Mart.
Indian executives were among the worst-paid in the world and there wasn’t much
sign that pay packages were about to get better.
Cut to 2001. It is celebration time at Infosys Technologies,
the high-tech star of India’s corporate world. Recently, 105 employees at the
Bangalore-based company each became eligible to cash in stock options worth
around US$250,000. Hundreds of other Infosys employees each hold options worth
about US$100,000, even though the company’s stock has fallen from peak levels
in early 2000. Similar scenarios are being played out at other high-tech
companies, such as Hyderabad-based Satyam Computers, where employees are
getting richer than they had ever dreamed possible.
For Indian executives the 1990s were a time of change. The
opening up of the Indian economy early in the decade created competition where
none had existed before and that created a demand for smart executives who
could sell, sell and sell in tough markets. Foreign companies like Coca Cola
and Procter & Gamble opened offices in India and went on a hiring spree for
the best talent in town. They were followed by merchant banks such as Merrill
Lynch and Goldman Sachs, which set new standards for salaries.
But that was only the beginning. The infotech revolution has
thrown up a clutch of high-growth corporations like Infosys, Satyam and
Bangalore-based giant Wipro that pay world-class salaries to their executives
and programmers. Also, a new wave of foreign companies like Kerry Packer’s
joint venture HFCL 9 Broadcasting India are attempting to make it big on the
Indian small screen, and they are reputed to be paying generously to attract
the hottest talent in the television business.
The biggest changes in corporate pay packets have been at
the top. The chief executive of a multinational corporation in the subcontinent
is now likely to earn as much as his counterpart in Singapore or Hong Kong.
That’s a dramatic change from 1990, when chief executives in India earned about
US$30,000 a year and were taxed heavily on their earnings. Of course, it would
be wrong to suggest that the subcontinent has caught up with the rest of the
world on salaries. Top executives are earning as much as their counterparts
abroad. But move one step down and it’s another story. Although at the next
level executives are earning more than ever before, their salaries are very
different from those of their international counterparts. "There’s a huge
gap between the top man and the number two," says one consultant.
Nevertheless, there has been dramatic progress on the salary
front for executives in South Asia, especially India, even if it is still a bit
of a roller coaster. Until mid-1999, salaries were rising explosively and
companies were willing to pay "whatever it takes" to get the right
person in the right place. But as the South Asian economy slowed, companies
began to get more cautious and tightened their purse strings. About 18 months
ago, the financial giants like the merchant banks began making staff cuts and
offering voluntary retirement payments. Then came the "dot-com bust"
of the past six months, which has staunched the flow of executives willing to
take a chance in cyberspace. Inevitably, these slowdowns have put pressure on
salaries and stalled the upwards movement.
But companies have been on a steep learning curve during the
past 18 months. In early 2000, the Indian stockmarket shot up and high-tech
corporations like Infosys soared to stratospheric levels. As a result, everyone
began looking at stock options as the best way of rewarding employees. However,
the stockmarket has fallen sharply and now both companies and executives are
having second thoughts about options. "Stock options are the fastest way
to attract people. But they are also the fastest way to lose people,"
points out another consultant.
As stock options fall out of favour what will come in their
place? The latest buzzwords are performance-related bonuses. These are
target-related payments that could amount to half the annual salary of many top
executives. Performance-related bonuses started in the financial sector and
consumer goods companies and are now widely used.
The tax department has also forced sweeping changes on the
Indian corporate sector. Until a few years ago, most corporations paid
executives a bewildering array of "perks" for everything from petrol
to newspapers to supplement salaries. But in the mid-1990s, the tax office
began cracking down on leading multinationals. Now, companies have decided that
it’s too much trouble to keep track of all these "perks" and they’ve
It’s been a long haul from "perks" to stock
options to performance-related bonuses, but South Asian executives are now
starting to catch up with the rest of the world.