The Covid-19 pandemic hasn’t just been a money-spinner for India’s information technology (IT) services companies, riding a wave of global demand for digital transformation projects. The CEOs at these companies have also had a more than usual profitable year.
At the end of financial year 2020-2021 (FY21), the CEOs of three of the country’s top homegrown IT services firms together took home a total of $17.6 million in compensation, including incentives, stock options, allowances and other C-suite benefits. That’s a 47% bump up from the $10.9 million combined payout they received at the close of the previous financial year (FY20)
Let’s break that down.
As of Monday, Tata Consultancy Services (TCS), the country’s largest exporter of software services, Infosys and Wipro had filed their respective annual reports of 20-F forms with the United States Securities and Exchange Commission. Form 20-Fs are required of some companies that issue equity in the US public markets by means of American Deposit Receipts (ADR).
According to the Wipro annual report, CEO Thierry Delaporte, who completes his first year in the job end of June, was paid a salary worth a little over $1.3 million in the reported period. Infosys CEO Salil Parekh took home $768,536 and TCS CEO Rajesh Gopinathan about $174,093.
The figures exclude additional compensation such as incentive, amount accrued for long term benefits, restricted stock unit (RSU) grants, commissions, variable pays and allowances, among other benefits.
Delaporte’s commission or variable pay stood at a little over $1.5 million, an “others” category of compensation stood at about $5.2 million, and a long-term compensation or deferred benefit at $758,719. His total yearly compensation summed up to $8.8 million.
Parekh’s bonus and incentives alone add up to an additional $1.7 million, amount accrued for long term benefits at $49,711, and RSU grants at about $3.5 million. His total yearly compensation then summed up to a little over $6 million.
Gopinathan’s benefits, perquisites and allowances stood at Rs 209.04 lakh, and commissions at Rs 1,700 lakh. His total then summed up to Rs 2,036.54 lakh (about $2.8 million) in yearly compensation.
In year-over-year comparison, the total FY20 compensation package (salary plus incentives) of the then Wipro CEO Abidali Neemuchwala totalled to a little over $4.4 million. At Infosys, Salil Parekh's compensation package totalled to Rs 34.27 crore (about $4.7 million). At TCS' FY20, Gopinathan was compensated with a total of Rs 13.38 crore (about $1.8 million).
The IT services companies didn’t just payout more in CEO salaries last year. The overall wage bill also increased in FY21.
On an overall basis, Bengaluru based Infosys spent a total of $7.49 billion towards company-wide wages and benefits in the reported period. The figure was an increase of 4.5% from a year ago. As of FY21 close, Infosys employed 259,619 employees globally, a 7% jump from a year ago. Of those, 200,147 were in the India payroll, 30,938 in the Americas, 16,412 in Europe, and 12,122 in other parts of the world.
At TCS, the employee benefit expenses stood at Rs 91,814 crore (about $26.19 billion), a 7% jump from a year earlier. The figure counts all people costs ranging from salaries, incentives and allowances to provident funds. The Mumbai based major had a net addition of 40,185 employees in FY21, taking its total headcount to 488,649 employees.
Wipro spent Rs 33,237.1 crore (about $4.54 billion) towards overall employee compensation. This was up 1.8% from a year earlier.
On a note on profitability, Wipro said (in the annual report) “If we are not able to mitigate rising employee compensation costs by passing such increases to clients, or increase our revenues sufficiently to offset increasing costs, our results of operations could be adversely affected.”
Wipro and Infosys echoed similar concerns surrounding wage pressures with yearly increases in India salary trends, its impact over an otherwise advantage over US or Europe based competitors, and ability to hire from such high-income geographies.
“Once the effective date is notified by the Government of India, we may also experience increased costs in future years for employment and post-employment benefits in India as a result of the issuance of The Code on Social Security, 2020. Unless we are able to continue to increase the efficiency and productivity of our employees over the long term, wage increases may reduce our profit margins,” Wipro said.
In return of surplus funds to shareholders, in line with the practice of returning 80-100% free cash flow to shareholders, TCS’ total dividend for FY21 amount to Rs 14,147 crore (about $1.93 billion). Payments at Wipro toward the dividends for FY21 amounted to Rs 545.9 crore (about $74.6 million). Meanwhile, interim dividend for FY21 at Infosys stood at $687 million.