The Securities and Exchange Board of India (Sebi) is strictly against astronomical salaries for top stock exchange officials and intends to keep a close watch on the same. The regulator will soon notify guidelines which will give it more say in approving pay packages of the top brass of all domestic equity bourses.
According to a senior Sebi official, the regulator is not comfortable with the disparity between the salaries of the top 3-4 key personnel of a stock exchange and the rest of the senior management. ?The disparity needs to be brought down, which means salaries of the top brass will have to be structured in a more rational and reasonable manner,? said this official on condition of anonymity.
Incidentally, just last month, the Sebi had approved the recommendations of the Bimal Jalan Committee which empowered it to approve the pay structure of key management personnel. Further, terms and conditions of their employment cannot be changed without the approval of the regulator.
Reports peg National Stock Exchange MD & CEO Ravi Narain?s gross salary at R7.35 crore in 2010-11 and joint MD Chitra Ramkrishna?s at R4.9 crore. The figures are much higher than those of the heads of other domestic stock exchanges.
In FY11, the then BSE chief Madhu Kannan got Rs 2.04 crore while Joseph Massey was paid Rs 1.80 crore.
?The compensation structure for key management personnel should be based on the principles of sound compensation practices issued by international fora like the Financial Stability Board,? Sebi had said in April after its board meeting.
The regulator has directed all exchanges to form compensation committees comprising mostly of public interest directors to determine salaries of key people. Further, the variable component of compensation has been capped at one-third of total pay, of which 50% can be paid only on a deferred basis after three years.
Meanwhile, stock exchanges are unhappy with the rule directing them to transfer a quarter of their profits to the Settlement Guarantee Fund of their respective clearing corporations. Industry players say exchanges are for-profit entities with proper risk control processes in place and such a rule is best avoided.
Former Sebi official and founder of Finsec Law Advisors Sandeep Parekh terms this requirement as suffering from ?being an absolutist rule.? ?…a blanket 25% may be way too high and amounts to expropriation contrary to the will of parliament to make exchanges for-profit,? he says.
?To bolster the risk management capacity of clearing corporations (CCs), the stock exchange will be mandated to transfer 25% of their profits to the Settlement Guarantee Fund of the CCs where their trades are settled,? Sebi had said on April 2.
WALLET CHECK
* Sebi not comfortable with salary disparity between 3-4 key personnel of an exchange and rest of senior mgmt
* It will soon notify norms giving it more say in approving pay packages of the top brass of all equity bourses
* Last month, Sebi approved the Bimal Jalan panel suggestions which empowered it to clear pay structures
* Regulator has asked all bourses to form compensation panels comprising mostly of public interest directors