Institutional EYE

Commentary on Corporate Governance Issues

Shouldn’t pay only be for performance?

Compensation is payment for what has been done. Performance is all about what has been achieved. Both can be measured. Surely, it cannot be so difficult to link the two and pay for performance. There are two numbers that have been unconnected with a company’s financial performance for a while. First is its share price and the second is the CEO’s pay. The share-price – atleast I would like to believe, is not something that the company has any control over. And the market price does periodically correct itself (- or atleast the divergence comes down for a short while). The CEO’s compensation is determined by a tighter group: the board, its remuneration committee, and the shareholders. In a mo

Comments on 'RBI's discussion paper on governance in commercial banks in India'

IiAS comments to RBI are under the following heads: No carve outs or exceptions for public sector banks Role clarity and focus on quality of directors Accountability of the CEO vis-à-vis board committees Tenure of the CEO Executive compensation disclosures: Pay vs Performance Board Attendance You can read our comments submitted to RBI here

By Invitation Some examples of countries where minority shareholders can elect independent directors

[endif]--The OECD’s “Owners of the World’s Listed Companies”, published in 2019, provides a detailed breakdown of the shareholder composition of almost 10,000 companies representing 90% of the global market capitalization. The overall picture it paints is of concentrated ownership in most developed, emerging and frontier markets – “Ownership concentration at the company level is commonly observed across markets (Exhibit 1). In half of the world’s publicly listed companies the three largest shareholders hold 50% of the capital and in three-quarters of the companies do the three largest owners hold more than 30% of the capital. In most markets, private corporations or strategic individuals app

Extending the boards reach

The governance of group companies will increasingly be an area of focus for SEBI. The Infrastructure Leasing and Financial Services(IL&FS) group at the time of its collapse operated through 347 entities. Some were wholly owned subsidiaries, a few were joint ventures (with State governments or foreign partners), it had a few associate companies and quite a few special purpose vehicles. A few of these entities were direct subsidiaries, but many others were upto four levels below the parent company. 60% of these were operating in India with the remainder 40% domiciled offshore. IL&FS’ precipitous fall, may be explained away by reciting Sir Walter Scott’s familiar lines from poem, Marmion ‘Oh, w

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