India Inc to go soft on executive appraisals

Mumbai: Company boards are taking a more sympathetic view of executive performance for 2020-21, measuring it on a relative and not absolute basis, even as corporates expect a wide sector-to-sector variation in CEO/CXO compensation in the next fiscal due to the pandemic impact. Barring a few sectors like hospitality and travel, the overall business outlook for 2021 is largely positive with the return of demand, said India Inc officials who are chalking out business scenarios with cautious optimism.Companies are rejigging business priorities to focus on supply chain management and balance sheet protection, they said. There is a disproportionate focus on business models and resilience of supply chain, mental wellbeing of employees, and balance sheet protection, they said. With some sectors recovering much faster than others, experts said top executives of some companies may get decent salary increases while some others may have to take a pay cut.Harsh Goenka, chairman of Mumbai-based tyres-to-technology conglomerate RPG Group, said salary increments of the top brass in 2021 will depend on how the pandemic pans out and demand recovery. 80224388“Overall, it will be a patchy situation this year with some industries like FMCG, pharma and IT – where things are almost back to normal or much better than last year – giving decent increases while some others like tourism or hospitality, among others, who bore a greater brunt of the pandemic, will not be able to afford that,” he told ET.“Boards cannot afford to give liberal increases to a CEO and not to the common people,” said Goenka who expects a K-shaped economic recovery with some sectors coming out of the pandemic impact faster than certain others. “It is a very unique situation and increases will vary from 0-15%, depending on the industry and affordability. Some will give decent increases while some will give no increases to cut costs. But definitely no company will want to go overboard in such times.”There has been a fair amount of rationalisation and cost cuts in 2020, and salary increases have been modest, Goenka said. He said strong domain expertise will be much in demand as far as CEO/CXO hiring is concerned.Officials said 2021 will be a better year for corporates but many of the business priorities and goal posts will have to be shifted, keeping the pandemic in mind.Covid-19 pandemic will change 2020 incentive plans for many companies as goals set at the start of the year were in many cases unattainable by the beginning of the second quarter, they said. “We have not made any substantial changes, except that wherever a business has considerably ‘underperformed’ due to the pandemic, a more sympathetic view will be taken in evaluation and compensation at the end of the financial year,” said Suresh Narayan, managing director of Nestle India.Management teams and compensation committees of companies said they need to incorporate the impact of Covid-19 into their goal-setting process for 2021.Many companies may be focused on cost reduction, cash generation and preserving the long-term viability of the business as they continue to weather the storm in 2021.

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