Sebi to issue norms on CEO pay, whistleblower protection

The Securities and Exchange Board of India (Sebi) will soon issue guidelines to listed companies on fixing salaries and perquisites of chief executives and put in place a whistle-blower policy for employees, allowing them to expose any wrongdoings without fear, so as to safeguard the interests of shareholders.

Sebi is expected to soon overhaul corporate governance norms, incorporating changes in the salary structure of top executives for listed companies.

While Sebi does not propose any cap on CEO salaries, it wants companies to be mindful of shareholders' interests while deciding pay packets of top executives.

However, Sebi is expected to prescribe a ratio of top management remuneration to the median staff salary.

The companies would also have to explain to their shareholders the relationship between their top management salaries and the performance of the company, as also the rationale for any pay hikes.

Sebi is focusing on improving disclosure norms so as to help investors make informed decisions rather than prescribe any salary limits. It also proposes penalties for non-compliance of corporate governance norms.

The market regulator is also expected to announce measures to empower minority shareholders in order to ensure compliance of model corporate governance practices and related norms.

Sebi also plans to usher in new concept of 'corporate governance rating' by independent agencies to monitor the level of compliance by the listed companies besides regular inspection by both Sebi and the stock exchanges.     

It is also proposed to put in place a mechanism for greater oversight by and on independent directors.

Minority shareholders would be given greater say in cases such as business dealings with entities linked to promoters and top management, changes in the article of association of a company and mergers and acquisitions, among others.     

Sebi wants companies to set up a board committee for framing and overseeing their whistle-blower policies in order to strengthen vigil among employees against any wrongdoings by promoters and top executives.

The market regulator is seeking to adopt better global practices through these proposals without increasing the cost of compliances.

These are part of the measures to ensure better corporate governance and improve investor confidence and bring back investors to the capital market, so that household savings can be channelised into investments.