My article published in year end issue of The Economic Times

Welcome 2010

In retrospect, 2009 did turn out to be much better than we anticipated. The capital markets have recovered from their lows, the job losses have been minimal in India and in most cases pay cuts have been restored. Further, as a barometer of things to come, most engineering and management campuses are reporting better off take and thereby indicating a positive economic outlook.

2009 was a defining year for several professionals and the job market witnessed a return of sanity after the three year bull phase. Senior professionals chastened by the past experience of excessively focusing on compensation and thereby making short term career calls are now looking to focus on the long term. Across the board, compensation levels were either static or witnessed modest single digit increases during the year and will continue to remain so as companies may not go overboard this time around. However, we are seeing big spikes in variable compensation even across traditional sectors as companies prefer to pay more for performance and keep fixed costs under check. Stock options which had temporarily lost its sheen are seen to be back in vogue.

The financial services sector bore the brunt of the slowdown. The retail financial services and broking businesses witnessed job losses as most banks and NBFCs wound up unprofitable lines. However, the wholesale and investment banking businesses have continued to hire selectively especially in the area of debt capital markets and related areas. We expect the situation to turn around across the sector gradually by the third quarter of the year. Compensation and bonuses in the sector have come under intense scrutiny from the regulators and are unlikely to see major upheavals in the near term, though in relative terms, executives in the sector continue to be the highest paid.

Looking forward, we expect the power and heavy infrastructure sectors to continue its robust growth spurring demand for professionals in the areas of project management, especially mega projects and CFOs with big ticket fund raising expertise apart from project specific niche areas. Further, we have seen increased demand for expatriate executives and returning Indians as local expertise is lacking or non existent in new growth sectors like power, airport infrastructure and allied areas which have been opened up to the private sector. However, the commercial and residential real estate sector which witnessed steep erosion in capital values seems to be limping back to action, but the outlook still seems hazy.

As growth plateaus in sectors like telecom, IT & ITeS one expects moderate hiring activity to compensate for natural attrition, though in telecom, due to emergence of new players the attrition levels will be higher across levels. Rapid digitization of government departments also presents a huge opportunity as companies due to slowing global demand are increasingly focused on the local market. Hence we do expect some additional jobs in this space.

The traditional manufacturing and engineering sectors dominated by large Indian conglomerates is set for a huge management overhaul as the next generation leadership is poised to take charge, giving rise to job opportunities. The other large sector which is emerging from the slowdown is retail which is slated to grow given lower real estate values and establishment costs and will emerge as one of the key sectors to watch out for, in the near future. Sectors like healthcare and FMCG continue to be robust, while we see increased action in areas like education as the private sector looks to play a larger role in the sector. The automobile sector seems to be back on track with several global majors vying for the local market with a shift in focus to smaller and more fuel efficient vehicles even as the top end market continues to expand in India.

Going forward, the green sector is poised to take off as the global debate on climate change intensifies. We expect to see the creation of several thousand jobs in the next decade in the areas of renewable energy, environment management, water and waste management, carbon trading and other climate related sectors as the government and the private sector gets its act right. Though these are early days yet, for sheer potential, the green sector could rival the IT & ITeS sectors in its ability to create new jobs in the near future.

In general, as we go in to the next decade, with the emergence of Indian multinational companies, we are seeing the gradual globalization of management teams in Indian corporations as they start recruiting senior expatriate executives who have the ability and experience of managing scale, complexity and geographical diversity apart from bringing global best practices to the table. On the whole, India and Indian companies are increasingly becoming attractive for expatriates who are keen to be part of our growing influence in the global business landscape.

With the increasing debate and scrutiny on corporate boards and governance, companies are seeking board candidates who lend credibility and provide independent counsel to CEOs and business leaders.

While the tide has certainly turned and things are only getting better it is important for companies and executives not to forget the lessons of the immediate past as they address new challenges and opportunities. On the balance, it has to be said that the India Inc. managed the slowdown reasonably well and one can look forward to a more positive start to 2010!

Follow the link to see the piece on ET

http://economictimes.indiatimes.com/Features/The-Sunday-ET/As-You-Like-It/No-scarcity-of-job-opportunities-in-2010/articleshow/5382852.cms?curpg=1

NYT Report on Women CEOs in India basis EMA Partners study

Female Bankers in India Earn Chances to Rule

MUMBAI — In New York and London, women remain scarce among top bankers despite decades of struggle to climb the corporate ladder. But in India’s relatively young financial industry, women not only are some of the top deal makers, they are often running the show.

HSBC, JPMorgan Chase, Royal Bank of Scotland, UBS and Fidelity International in India are run by women. So is the country’s second-biggest bank, Icici Bank, and its third-largest, Axis Bank. Women head investment banking operations at Kotak Mahindra and JPMorgan Chase and the equities division of Icici. Half of the deputy governors at the Reserve Bank of India are women.

In a country where parents in some areas still prize boys over girls; where overall female literacy rates are poor; and Sania Mirza, a top tennis player, said this month that she would quit playing after marriage, the banking industry’s wealth of women in management may seem surprising. But women in the industry, many of whom have also worked in London and New York, say India provided the right combination of supportive, mostly male, managers and a diverse work environment that did not require them to be “one of the boys” to succeed.

This “isn’t a golf-playing, beer-drinking homogeneous culture,” said Naina Lal Kidwai, group managing director and country head of HSBC in India and a former head of Morgan Stanley’s investment bank in India. Male bankers and managers run the gamut from devoutly religious to devoted family men to late-night socialites.

Women “could join the workplace on their own terms,” Ms. Kidwai said. “You still have to network, you still have to work hard, but that made it easier.”

That means India is without an old Wall Street staple: Women who feel they must act like the stereotypical male banker to advance. There are no swaggering “masters of the universe” in this group. Top female managers regularly wear saris and talk openly about their children and husbands.

These women handle many of India’s biggest deals — raising $9.7 billion for the power company NTPC or negotiating Vodafone Group’s purchase of an $11.1 billion stake in Hutchison Essar.

Almost all of them are in their 40s and 50s, are from wealthy backgrounds, went to excellent schools in India and abroad, and graduated at the top of their classes before excelling at the bank they joined. So they often enjoy the same status as the men who were their competition and their banking clients.

Banking may be more of a meritocracy than other professions, women in the business say, because there is an easy way to keep score: Look at the bottom line.

“You got your next big challenge based on your performance and your potential, not whether you were male or female,” said Chanda Kochhar, chief executive of Icici Bank, where women make up 40 percent of the senior management. Mrs. Kochhar has been at the bank for her entire 25-year career, moving from corporate to retail banking, then directing the international business before becoming chief financial officer.

Women “excel when they are subject to an open competition,” said Shyamala Gopinath, one of the Reserve Bank of India’s two female deputy governors.

India operations of big global banks constitute a tiny portion of overall profits, because debt markets and deal size and volume are smaller than in developed countries. But India’s importance has grown as investment banks bet on emerging markets for growth and simultaneously move more complicated jobs to India to cut costs at home.

So sometimes these women oversee more employees than many top managers at the banks’ headquarters.

About 11 percent of HSBC’s 331,000 employees are in India, for example, and of JPMorgan Chase’s 220,000 employees, nearly 7 percent are in India.

One in five of India’s big bank, insurance and money-management companies is headed by a woman, according to a study by the headhunting group EMA Partners. By contrast, there are no women leading major American or European banks, and no woman has ever run a Wall Street investment bank.

Bosses sometimes gravitate toward women in India because they think “women are less corruptible, more straightforward and above board most of the time,” said K. Sudarshan, managing partner, India, for EMA.

In terms of compensation, none of the women interviewed said they had ever felt they were paid a different amount than their male counterparts.

“Here salary is totally nondiscriminatory,” said Usha Thorat, the other female deputy reserve governor at India’s central bank. The idea that women might be paid less for the same job as men in the United States “came as a surprise to me,” she said.

At the same time, women in banking in India say they have always felt more pressure than men.

“Always, that is a given,” Ms. Kidwai said. “It was very clear we had to perform better and work harder.”

She added that the women now heading banks had often been the first women hired in their early jobs and had been “watched like hawks.”

And they all relied heavily on a support network of family and India’s cheap labor pool to help watch their children. Some enlisted mothers and mothers-in-law for child care for months or years, and all of them employed full-time nannies and maids.

The length of maternity leave differs from bank to bank, but the average is about three months.

Meera Sanyal, head of RBS in India, started working in India at a branch office of Grindlays Bank in Calcutta, dealing with a barrage of upset corporate customers and a unionized staff that resented her for replacing an older man. She revamped the way the bank handled clients, according to profitability; learned Bengali to communicate better with the local staff; and ultimately convinced reluctant unions to accept automation, though it would mean layoffs.

She was working at Lazard in India when she became pregnant with her first child. She recalls that when she told her boss she wanted to work flexible hours after her baby was born, he said: “Are you crazy? We’ve invested a lot of money in you.”

Rather than quit, she said, she vowed to work so hard until she gave birth that Lazard would feel it had gotten its money’s worth. She wrapped up a deal on July 6 and delivered the baby a day later. After that, her boss reconsidered, allowing her to work flexible hours for the same pay. There are several men, she said, who “made it possible for me to do what I wanted to do.”

Now she is doing the same for other women at the bank. Recently, a risk manager said she needed to quit because she was pregnant and had been prescribed bed rest. Ms. Sanyal suggested that the bank set up a home office instead that would allow her to work from bed. After having a healthy baby, “she’s back at work and absolutely a star performer,” Ms. Sanyal said.

“Small things like that cost us nothing,” she added. “It is just a way of being more flexible.”

Kalpana Morparia, chief executive of JPMorgan Chase in India, had some simple advice for Western banks that are trying to increase the number of women at the top. “Just be gender neutral,” she said. “Men are just as smart as we are.”

You may see the original link to the story http://www.nytimes.com/2010/01/28/world/asia/28iht-windia.html?pagewanted=1

Shifting Baseline

Early this year, the fault lines had started appearing in the global economy; especially the United States and the sub prime crisis had started taking its toll on large global financial institutions. Going in to 2008, India like other emerging markets had witnessed a period of hectic economic growth. In the past 5 years along with the sensex and the real estate capital values, corporate sector had seen a whopping 400 % increase in salaries given the demand – supply equation for talented, proven managers. In the meanwhile, driven by market growth, cash flows and availability of cheap credit, Indian companies had unfurled their global ambition and embarked on big ticket acquisitions. At the start of this year, there was still a strong belief in the decoupling theory and India in everyone’s eyes was still largely insulated from what was seen as someone else’s problem. However, by the middle of the year, falling capital markets on global and local cues, the sudden collapse of Lehman Brothers and tightening global liquidity set the alarm bells ringing for India Inc... The overnight change in market situation caught corporate India unawares and left very little time to react.

Going in to the New Year and the last quarter of the financial year, the specter of layoffs and salary cuts does loom large across sectors. Companies which hired aggressively for new ventures or anticipating high growth rates are now left with several employees on ‘the shelf’. Financial services, especially broking, investment banking and retail banking, Real Estate, ITES / BPO, Automobile and modern retail to an extent are the sectors which will face the heat. Infrastructure projects which depend on fresh dose of capital, both equity and debt, are also seen at risk and may see a few job losses. The highest impact will be felt at the entry and middle levels where the intake is expected to be reduced in the short term. Certain slowdown proof sectors like healthcare, energy, education, telecom, basic consumer goods and services will continue to be robust during these times. However, irrespective of the sector, jobs which do not have a clear ‘Monday morning agenda’ are at risk. As India does not possess a social security apparatus, the societal impact of layoffs remain an area of huge concern.

On a positive note, things are expected to improve from April, when companies recalibrate their growth plans and things settle down in a lower state of equilibrium. Smart companies focusing on the long-term will certainly look at this as a great opportunity to acquire good talent at reasonable costs. Companies will look to cherry-pick talent to sustain and build long term competitive advantage. Proven performers who have a great track- record of success in creating shareholder value will continue to be in demand and more so during tough times.

Senior people may have to double hat as organizations will look to cut the flab and several staff roles could be eliminated. Like equity markets, real estate or commodities, the compensation levels may also see a correction and we will see the emergence of aggressive variable pay regime across companies. ESOPs which is a cyclical retention tool will be in vogue again at these rock bottom valuations and one can expect a significant tax effective upside in the medium term.

The traditional sectors like FMCG, manufacturing and heavy engineering which had lost out on talent in the past few years are expected to be back in favor. The public sector and government jobs could regain some of their lost sheen. On the whole, India, which will continue to grow in relative terms to the rest of the world, will be even more attractive for global talent. Expect to see more instances of returning Indians and expatriates accepting or exploring job opportunities in India.

Established organizations which have witnessed such business cycles in the past are better equipped to deal with the situation and one can expect them not to make knee jerk decisions on layoffs and salary cuts. Across most sectors, compensation increase will be in single digits this year, though good performers will continue to be differentiated and will be unscathed. We expect to see consolidation and up- gradation of talent across corporations and in fact, on the positive side, one would expect companies to invest further on key performers for the long term without the fear of attrition.

Lastly, the era of across the board double digit salary hikes and yearly promotions are certainly over for now. Easy money, fancy cars, inflated job titles and bonuses will have to wait and it will be back to the good old fashioned method of hard work and perseverance which will separate the men from the boys. Going in to 2009, one thing is for certain; the balance of power has well and truly shifted to the employer and will remain so for some time to come.

- K Sudarshan
The author is Managing Partner - India, EMA Partners International, A Global Executive Search firm

Shortage of quality leadership talent – a ticking time bomb?

Shortage of quality leadership talent in India Inc. is a hot button issue and we have seen several debates on the severity of the crisis. To put this in perspective, let’s go back to the market scenario in the early to late eighties. Consider a fresh graduate passing out of one of the IITs or IIMs. No doubt, he/she got a job from the campus, but what were the options then? The chosen or available options those days were Hindustan Lever, ITC, Tatas, Crompton Greaves, Asian Paints, Tube Investments, and BlowPlast amongst others (many of them not worth a mention here) for management graduates with the odd ones going into a few multinational banks present at that time like Grindlays or Citibank and for Engineering graduates of those days, the chosen organizations were SAIL, BPCL, L&T, ONGC and the likes.

Cut to 2008, most of the companies which ruled the roost in campuses in the past have been relegated to day 3/ day 4 slots or have altogether stopped hiring from the top campuses and some of the consumer product companies are barely managing to hang in there. Some of the industry sectors like Advertising which used to be amongst the sought after sectors have very few takers. Public sector companies no longer are the favorite destinations for budding engineers. Today the campuses are ruled by investment banks, strategy consulting firms, private equity firms and technology companies edging out the old favorites. The story is the same for some of the top engineering companies with most bright Engineers pursuing a career in management. Confronted with multiple options and entry level compensation reaching stratospheric levels due to intense competition to hire the brightest of them, the times could not have been better for our fresh management graduates and engineers. Due to these factors, the quality of entry level talent available to these companies have suffered significantly and further with the advent of dual careers, industry and factory locations have no takers.

Most large organizations in the past have relied on a ‘bottom up’ hiring strategy to develop in house leadership talent. With the unprecedented economic growth opening up a plethora of opportunities for our managers, most companies have bled talent at middle and senior management levels and their well crafted succession plans have gone awry! With deteriorating quality at the entry levels and the attrition at middle and senior levels it is a double whammy for several traditional businesses.

For example, in one of India’s largest and premier Engineering companies the average age of the management team is over 60 years and the current CEO, in his late sixties is forced to extend his tenure in the organization with no successor in sight! The same is the case for several traditional business houses in the manufacturing sector.

In such a scenario, with a rapidly growing business and global ambitions most companies are forced to look for lateral senior management hires, which in turn has led to unprecedented increase in CXO attrition. According to a recent EMA study, India Inc. witnessed a 66% CEO attrition in the top 100 corporates surveyed. Compounding the issue further is the shorter shelf life of CXOs and increasing pressures on performance and accountability which affects longevity. With the burgeoning demand, senior executives opt for job switches when the going gets tough!

What are the after effects of shortage of leadership talent on corporations?
· Single company careers are passé and companies are resigned to the fact that CXO tenures will be shorter. In these times, a 4 year stint in a company or a job is a ‘long stint’.
· Unrealistic and unsustainable compensation levels as the war for talent intensifies resulting in higher costs, lower productivity and lack of continuity.
· Compromise candidates affecting performance and growth of business. Changing age profile of CXOs. The average age profile of CXOs in India Inc. dropped by 7-10 years for most sectors according to a recent EMA study.
· Extended tenures for senior executives who are retiring due to lack of successors in the pipeline.

Well, it indeed looks like a ticking time bomb, but how are companies coping with the situation? Successful companies have responded well and created strategies to attract and retain talent. Relying on generous compensation and wealth creation as the only ‘magic pill’ for attracting and retaining your key resources is a sure shot recipe for disaster. Then what is it? There is an interplay of multiple factors which makes the organization the preferred destination for top talent and creating a long term sustainable employee brand. As we have seen, the best employers are often not the best paymasters.

First and foremost, is to create a sense of ownership and belonging to the organization. Successful organizations have a culture which supports and encourages entrepreneurial behavior, the freedom to make informed business decisions and above all, eliminating the fear of failure.

An ambitious business leader is constantly evaluating headroom for professional learning and growth and it is critical that the organization is capable of creating such opportunities. This keeps senior managers motivated with fresh challenges all the time.

Job rotation across multiple businesses, functions and geographies prepare mangers to take on new roles with ease if there is an exit. This is also critical when the organization is rapidly growing. The company needs hi potential stars for their new initiatives and also need to back fill positions vacated by the current incumbents who are moving on. Larger organizations with multiple businesses and multiple geographies have the ability to offer exciting career growth opportunities to their managers and offer them newer challenges to keep them fresh and charged. This is a great retention tool.

Also another innovative retention strategy is to create a unique operating culture and reward exceptional performers with larger responsibilities. Keep your stars ahead of the market curve and give them bigger roles, which your competition cannot offer!

Finally, as organizations realize, employee churn is inevitable given the market forces and as long as it is healthy, it also provides opportunities to rising stars at the top of the pyramid.

So after all, the talent issue will perhaps not boomerang on your organization provided you plan well ahead and create the right environment for your stars to thrive and perform!

- K Sudarshan

The author is Managing Partner - India, EMA Partners International, A Global Executive Search firm

Don't count on it

In recent times, the biggest challenge for search firms and potential employers is the threat of ‘counter offers’ made by the prospective employee’s current organization. Several high profile exits have been stalled and has led to bad blood and wastage of precious senior executive time apart from derailing business plans. We have seen that executives have been cajoled or in some cases even threatened! to stay on in their current organizations.

If you are in the process of moving on from your current organization and tempted to accept a ‘counter offer’, consider the following reasons why you should not fall for the bait!

1. The circumstances which caused you to consider a change will certainly repeat themselves in the future, even if you decide to stay on. The fundamental reasons do not change overnight.

2. Our past experience and statistics prove that the probability of executives accepting a counter offer voluntarily leaving in six months or have been let go within a year, is extremely high.

3. Rethink on the type of person or the company whom you work for if you have to threaten to resign before they promise to give you what you are really worth either now or in the future.

4. Where is the raise/ position for the counter offer coming from? Is it just your next pay rise/ promotion which has come early?

5. If your current employer manages to match your offer, consider that they have stretched to their maximum whilst with your prospective employer, it is the starting point.

6. Your organization will now keep an eye or launch a search for another person either externally or internally. They only held on to you to stave off a temporary crisis.

7. You have made your organization aware that you are not happy. From this day, your loyalty or commitment will always be in question. This will have a telling effect in the future if you have to be considered for mission critical assignments within the organization.

8. Once the word spreads in the organization, your relationship dynamics with your peer group and superiors could change for ever.

9. Last but not the least, accepting a counter offer is an insult to your intelligence and a blow to your personal pride, knowing that you were ‘bought’ and you are no longer free on your own terms!


At the end of the day, it is also a lesson for employers who fail to assess the true value of their people while they are with them and it is certain that if they don’t, someone else will!

- K Sudarshan

The author is Managing Partner - India, EMA Partners International, A Global Executive Search firm

CXO Compensation in India – Current trends

CXO compensation levels in India are headed north, but are still significantly lower than their counterparts in international markets. The recent increase in compensation we are witnessing now is largely due to the demand supply scenario and is more accentuated in certain sectors like financial services, retail, technology enabled services, aviation and life sciences. The burgeoning demand across sectors for seasoned business leaders is pushing compensation to stratospheric levels in the Indian context. Indian corporations are increasingly looking at an extended global pool of candidates for leadership roles.

However, at a larger level, India is still not a first stop destination for top notch global executive talent and is still some distance from being an active participant in the global cross border interplay of talent in most sectors. Due to the unprecedented and sustained growth there is an acute need to attract culturally competent business leaders to India from other parts of the world. But the biggest impediment today is the current size and scale of Indian businesses. Most Indian corporations are still in the process of globalizing their businesses and building size and scale. Though we are moving in that direction it would be unrealistic to expect Indian CXO compensation to be at par with global benchmarks at this point.

Global corporations establishing captive centers in India are also setting new benchmarks on local compensation. Though these benchmarks are significantly higher than local levels still it offers them significant arbitrage operating out of India.

Total compensation including base pay and variable performance pay is largely a function of value delivered by the CXO to the business when measured on various parameters including relative growth vis-à-vis competition. Historically variable compensation in India has remained a small percentage of fixed or base pay with no significant upside. In certain markets variable pay by definition is non linear and in some cases it is even 20-25 times base pay and payable on achievement of laid down business and profitability objectives. Going forward we need to take a closer look on the overall design and structure of CXO compensation in India and incorporate measurable performance metrics and suitably reward hi-performance on a non linear basis. This will go a long way in fostering a business promoter mindset for CXOs as opposed to a key employee mindset.


The other significant aspect of CXO compensation in India is the huge disparity which exists between promoter/owner CXOs and professional CXOs. In the case of multinationals operating in India there is a significant gap in compensation between expatriates serving in India and local managers. The occasional spikes we see in CXO compensation is largely on account of this factor.

With the market dynamics and the economy undergoing rapid change there will be a shift in employer – employee relationships which will alter the compensation philosophy of many organizations. Today most Indian organizations have moved the definition of compensation beyond cash and are building a more holistic package which includes stock plans, performance pay, deferred pay and a slew of exit barriers and of course long term wealth creation opportunities for their key executives. Already stock plans have added significant wealth to senior mangers in the past few years and today are real exit barriers for many of them.

Moving forward, as India Inc globalizes and the business leadership becomes more diverse and multicultural, Indian corporations will have to compete on a global basis for talent. Then we would see a systemic shift and perhaps we could imagine a situation where compensation levels in India would be at par with respective global industry benchmarks.

Well, rather than broadly addressing CXO compensation on US$ terms the scenario will perhaps look different when the figures are adjusted for purchasing power parity and relative size of organizations.

- K Sudarshan

The author is Managing Partner – India, EMA Partners International, A Global Executive Search Firm

Understanding Your Compensation

As HR Managers grapple with a serious talent crunch in certain sectors, compensation and wealth creation opportunities for professionals have become the buzz words. Today increasingly organizations are moving away from a ‘one size fits all’ approach and are open to structure compensation to suit the needs of the individual, especially at Senior levels. Hence it is critical for executives to look beyond the numbers and cost to company figures to get a true picture of what is in the store.

Also the other important aspect one should keep in mind is your current compensation and broad industry benchmarks. Compensation offered is often a function of the demand supply situation in your industry and usually organizations use your current compensation as a base for negotiations and factor an increase on the same.

At some level, there is also an assessment of your key drivers for change and usually compensation alone as a key driver is a ‘put-off’ for most organizations. So you need to play your cards carefully to ensure that it is win-win situation for you as well as the hiring organization.

(As you sit down to negotiate/ structure an appropriate compensation for yourself you need to keep the following points in mind.)

Base pay:
You need to see what is the percentage of base pay in the overall compensation. Usually your retirals (PF, Super Annuation, and Gratuity) are a function of your base pay. Base pay is usually around 40-50% of your total compensation excluding variable pay. Also in large organizations, annual increases are effected as a percentage of the base.

Housing:
Companies these days either give a lump sum house rent allowance as part of the overall compensation or provide a company leased accommodation. In larger metros, especially Mumbai, housing is a significant cost and one needs to understand the company policy on deposits for housing. Also the cost would also depend on the location of the house and convenience from work/family perspective.

Flexi Basket allowance:
Companies give a flexible basket allowance which could be structured as per the employee needs under various heads permissible as per the income tax rules. Items like car lease cost, leave travel etc. could form part of this. It is advisable to take the counsel of the company taxation manager or your personal tax advisor while structuring this part.

Variable pay:
You would need to understand the specifics of this head and also understand if there are any minimum guarantees incorporated or performance/ operational parameters on which this payout is dependent on. It is advisable to spend time with both the HR as well as the line managers to understand the downside as well as upside of variable pay and check out a few past trends in the organization. Usually variable pay may range between 50-150% of base pay in some organizations (Again you will see the importance of your base pay!)

Long term wealth creation plans

These days organizations are constantly devising ways to retain their best talent by ring fencing them with long term wealth creation plans in the form of employee stock option plans long term incentives or deferred bonuses.

Employee stock options are granted to selected senior managers of a company on certain terms. They carry the right (but not the obligation) to buy a certain amount of shares in the company at a predetermined price. Normally employees must wait for a specified vesting period before being allowed to exercise the option. The broad idea behind the stock option is to align incentives between the management and the shareholders of a company.

One needs to understand the upside of such plans and suitably factor this in your decision. In the recent bull run, ESOPs have played a key role in creating employee wealth. The downside here is that the company stock price could drop below the exercise price.

Privately owned or unlisted local entities or MNCs also structure shadow/ phantom options for their senior executives. A phantom stock plan gives senior managers a bonus based on the market appreciation of the company’s stock over a certain period of time without actually giving them any company stock. The phantom stock follows the price movement of the company’s actual stock, paying out any resulting profits.

Golden Parachute

Golden Parachute is a clause in the employment contract that provides the executive with a severance package in the event of his/her termination. The clause may include a continuation of salary and perquisites and at times accelerated vesting of stock options. This clause usually is seen more in the case of C-suite executives.

To summarize, though compensation is an important barometer for measuring an opportunity on a short term basis, the decision should be based on the long term potential of the role in question and the impact it makes on your future employability.

- K Sudarshan

The author is Managing Partner – India, EMA Partners International, A Global Executive Search Firm