IT firms defer variable payouts months after CEOs got huge hikes

Even as IT majors Wipro, Tata Consultancy Services (TCS), and Infosys have deferred the variable compensation payout to employees, a few months earlier, the CEOs of the companies were given huge salary hikes.

The three companies have deferred the variable pay to employees. Wipro will be delaying variable pay to its mid- and senior-level executives for the June quarter, reportedly due to pressure on operating margins. Similarly, TCS has delayed the variable pay for mid and senior-level employees. Infosys, too, reduced the variable pay to 70 per cent for the first quarter as margins took a hit. 

TCS, however, has clarified that there is no delay in the payout. The company, in a statement, said: “Variable pay is either paid in month one or month two as per the normal process, and there is no delay in this process. 100 per cent VA is being paid for Q1.” 

While the companies have made this move now, a few months ago they handed out huge rises to the CEOs. For instance, in FY22, Infosys CEO Salil Parekh got a 43 per cent hike and he drew ₹71 crore. Thierry Delaporte, CEO of Wipro, drew ₹79.8 crore, a 20 per cent hike. 

“The hikes to the CEOs were given at a time when the situation was very different in terms of overall global economic growth and the IT sector was bullish. But since then the situation has changed with the Russia-Ukraine war and the global economic slowdown, hence, the companies have deferred the payments,” Mitul Shah, Head of Research at Reliance Securities told BusinessLine. However, going forward, the hikes wouldn’t be as exuberant as before as the base of the CXO salary has become sizable now, Shah added.

An analyst with a leading brokerage firm, requesting anonymity, told BusinessLine: “In May 2022, the company justified a 43 per cent increase in salary to CEO Salil Parekh, saying the firm has achieved industry-leading growth in recent years. Such astronomical figures of salary are being drawn by the CEO while employees are drawing such less amount.” 

Pointing out that Infosys’ founder Narayana Murthy had, in the past, said that giving huge salaries to just the CEOs does not solve any purpose and engineers should be paid more. He had suggested reducing the median salary difference between CEOs and staffers. But it seems that Infosys is going in exactly opposite direction, the analyst added. 

Infosys, in its annual report, justified Parekh’s salary by saying his compensation is due to factors such as the increase in market capitalisation (by ₹5,77,000 crore), and a higher total shareholder return (TSR). It said: “Under Salil’s leadership the company’s TSR was at 314 per cent, the highest among peers and was well above the TSR of benchmark indices of Nifty at 77 per cent and S&P 500 at 117 per cent.”

Wipro in its annual report had explained the breakdown of its CEOs salary as it stated: “The remuneration of Thierry Delaporte is computed on an accrual basis. It includes the amortization of RSUs granted to them, which will vest over a period of time, and RSUs (restricted stock units) that will vest based on the performance parameters of the company.” 

Kamal Karanth, Cofounder of Xpheno, said: “When the context of these businesses is looked at, it’s always considered that CEOs are the ones who came and did the turnaround or doing a turnaround. The premium CEO has cannot be compared with mass employees whose attrition are at a rate of 25 plus per cent.” 

While employees are replaceable, the CEOs are a little more indispensable. Ideally, people would like to see CEOs take a cut, but that is up to the company board, he added. 

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