Independent director pay jumps at top firms in FY25

Bengaluru: Independent directors’ pay surged at India’s top-tier companies in FY25, led by larger corporates, as boards paid more for increased responsibility and time commitment, and to attract experienced oversight amid rising governance, regulatory, and risk demands.

Median pay for independent directors in the top 50 companies by market capitalisation climbed 22% to Rs 69.8 lakh in FY25 from Rs 57.18 lakh in FY24, per an analysis shared with ET by specialised executive compensation advisory firm Exec-Rem Advisors. The robust increase reflects companies’ willingness to reward time-intensive efforts.

The analysis grouped the top 200 companies separately by market capitalisation and revenue, respectively.


Even in the second and third quartiles of these 200 firms by market cap, median pay rose by 20% to Rs 46.5 lakh in FY25 from Rs 38.87 lakhs in FY24 in the former, and 15% in the latter to Rs 30.44 lakh from Rs 26.39 lakh. Compensation, however, remained largely flat in the bottom quartile, rising barely 2% to Rs 30 lakh in FY25 from Rs 29.43 lakh in the previous fiscal.

A similar skew played out when the top 200 corporates were grouped by revenue.

Independent directors at the top 50 companies by revenue earned Rs 76 lakh in median pay in FY25, up 19% from Rs 63.7 lakh in the year before, fuelled by double-digit growth in commissions.

Median pay for independent directors in the second quartile by revenue rose 31% year-on-year to Rs 46.09 lakh in FY25 from Rs 35.14 lakh; while for those in the third quartile, it grew by 10% to Rs 35.18 lakh in FY25 from Rs 31.93 lakh in FY24.

Experts said the robust pay hike, especially given the volatile business environment globally, underscores how the role of independent directors is increasingly becoming more demanding and valuable.

“Independent directors are spending significantly more time in the wake of elevated geopolitical risks, macro headwinds, and technological advances that are challenging the traditional business structures,” said Anubhav Gupta, managing director, Exec-Rem Advisors. “Companies want to ensure that they are adequately compensated for their guidance to CEO and management to navigate a complex and dynamic business environment.”

Competitive compensation also helps in ensuring that independent directors don’t spread themselves too thin by taking on more directorships, given the time commitment involved in each, he added.

Amit Tandon, managing director of proxy advisory firm Institutional Investor Advisory Service India (IIAS) said the pay spike can also be explained by the fact that independent director compensation has been relatively low in the past. “Given the increased responsibility placed on independent directors, the remuneration can be viewed as ‘catching up’,” he said.

Among sectors, information technology firms offer the highest payouts to independent directors, the Exec-Rem survey found, with a median compensation of Rs 81.15 lakh in FY25; followed by banking and insurance (Rs 55.75 lakh), automobile and auto components (Rs 55.63 lakh) and FMCG (Rs 50.48 lakh) in FY25. The highest year-on-year jump has been in the FMCG sector (53%), followed by consumer services by 49% to Rs 44.75 lakh median pay.

“Independent director compensation is relatively higher in sectors like technology primarily due to greater global business complexity,” said Gupta. “In four out of top five IT services companies, the total spends on independent director commissions is more than Rs 10 crores. Some of these companies also have overseas directors.”

The sharp jump in independent director compensation in the consumer services industry is primarily led by new-age, tech-led consumer services firms in the quick commerce space.

With cash commissions reaching significant levels, regulators should re-think the stance on equity compensation for independent directors, said Gupta, adding that long-term instruments like restricted stock units are better aligned with shareholder interests.

“We advocate for companies to cap the absolute amount it will pay directors, giving investors clarity on what to expect,” said Tandon at IIAS.