Playing catch-up

first_imgAs stock options fall out of favour what will come in theirplace? The latest buzzwords are performance-related bonuses. These aretarget-related payments that could amount to half the annual salary of many topexecutives. Performance-related bonuses started in the financial sector andconsumer goods companies and are now widely used. After years as the poor relations, South Asia’s executivesnow hold stock options, receive performance-related bonuses and earn decentsalaries. Paran Balakrishnan reports How much are Asian executives worth? The answer ten yearsago 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 muchsign that pay packages were about to get better. Playing catch-upOn 1 Feb 2001 in Personnel Today But that was only the beginning. The infotech revolution hasthrown up a clutch of high-growth corporations like Infosys, Satyam andBangalore-based giant Wipro that pay world-class salaries to their executivesand programmers. Also, a new wave of foreign companies like Kerry Packer’sjoint venture HFCL 9 Broadcasting India are attempting to make it big on theIndian small screen, and they are reputed to be paying generously to attractthe hottest talent in the television business. For Indian executives the 1990s were a time of change. Theopening up of the Indian economy early in the decade created competition wherenone had existed before and that created a demand for smart executives whocould sell, sell and sell in tough markets. Foreign companies like Coca Colaand Procter & Gamble opened offices in India and went on a hiring spree forthe best talent in town. They were followed by merchant banks such as MerrillLynch and Goldman Sachs, which set new standards for salaries. Nevertheless, there has been dramatic progress on the salaryfront for executives in South Asia, especially India, even if it is still a bitof a roller coaster. Until mid-1999, salaries were rising explosively andcompanies were willing to pay “whatever it takes” to get the rightperson in the right place. But as the South Asian economy slowed, companiesbegan to get more cautious and tightened their purse strings. About 18 monthsago, the financial giants like the merchant banks began making staff cuts andoffering voluntary retirement payments. Then came the “dot-com bust”of the past six months, which has staunched the flow of executives willing totake a chance in cyberspace. Inevitably, these slowdowns have put pressure onsalaries and stalled the upwards movement. Cut to 2001. It is celebration time at Infosys Technologies,the high-tech star of India’s corporate world. Recently, 105 employees at theBangalore-based company each became eligible to cash in stock options wortharound US$250,000. Hundreds of other Infosys employees each hold options worthabout US$100,000, even though the company’s stock has fallen from peak levelsin early 2000. Similar scenarios are being played out at other high-techcompanies, such as Hyderabad-based Satyam Computers, where employees aregetting richer than they had ever dreamed possible. But companies have been on a steep learning curve during thepast 18 months. In early 2000, the Indian stockmarket shot up and high-techcorporations like Infosys soared to stratospheric levels. As a result, everyonebegan looking at stock options as the best way of rewarding employees. However,the stockmarket has fallen sharply and now both companies and executives arehaving second thoughts about options. “Stock options are the fastest wayto attract people. But they are also the fastest way to lose people,”points out another consultant. The tax department has also forced sweeping changes on theIndian corporate sector. Until a few years ago, most corporations paidexecutives a bewildering array of “perks” for everything from petrolto newspapers to supplement salaries. But in the mid-1990s, the tax officebegan cracking down on leading multinationals. Now, companies have decided thatit’s too much trouble to keep track of all these “perks” and they’veabandoned them. The biggest changes in corporate pay packets have been atthe top. The chief executive of a multinational corporation in the subcontinentis 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 aboutUS$30,000 a year and were taxed heavily on their earnings. Of course, it wouldbe wrong to suggest that the subcontinent has caught up with the rest of theworld on salaries. Top executives are earning as much as their counterpartsabroad. But move one step down and it’s another story. Although at the nextlevel executives are earning more than ever before, their salaries are verydifferent from those of their international counterparts. “There’s a hugegap between the top man and the number two,” says one consultant. Previous Article Next Article Comments are closed. It’s been a long haul from “perks” to stockoptions to performance-related bonuses, but South Asian executives are nowstarting to catch up with the rest of the world. Related posts:No related photos.last_img read more