CEOs made to sweat more for money: Spencer Stuart

Stock options are back in CEO salaries. Performance-linked variable compensation is on the rise, even as overall CEO package is going down. And companies are no longer looking at Rambo-like growth drivers, but CEOs who have the expertise to survive and consolidate the business.

As companies find themselves in the midst of an unprecedented meltdown, the role and expectations from CEOs are changing, according to Spencer Stuart, one of the largest global recruitment agencies for senior directors and CEOs.

It has made these findings from recruitments undertaken in India across sectors like financial services, telecommunications and FMCG, amongst others.

Employee stock options, which had disappeared from the scenario, are back with a bang.

With stock markets down more than a half from their peaks about a year ago, companies and their promoters don't find it too costly to give stock options to their CEOs. For a CEO also it is an attractive preposition as he feels that the prices are so depressed that they can only go north in the future.

"Companies are also comfortable that the options would motivate CEOs to perform and provide enhanced stakeholder value," said Anjali Bansal, practice head of Spencer Stuart in India.

At the same time, variable pay is becoming a bigger chunk of the total package of a CEO.

Earlier, the variable part of the salary was normally between 15 per cent and 20 per cent. Now, it constitutes over 30 per cent of the package, the Spencer Stuart findings said.

In other words, the CEO can hope to make big money only if he can deliver.

The new business realities have brought about a change in the qualities required in a CEO.

Those with expertise in finance or experts in mergers and acquisitions are not the popular choice any longer. Instead, those who are good in running operations with a firm grip on everyday business are more in demand.

"Earlier companies looked for CEOs who are finance professionals to raise money for growth but now companies are looking at CEOs with operational experience, who can lead and motivate a team," said Bansal.

"Companies are looking at CEOs for survival rather than growth alone. There has been a fundamental change in the choice."

Meanwhile, CEO packages continue to take a knock. According to Spencer Stuart, while CEO salaries across categories have fallen by an average of 25 per cent to 30 per cent, the financial services sector has seen a drop of over 35 per cent.