1. Govt Brings Out CXO Pay Checklist for Listed Firms
To ensure proper disclosures and regulatory compliance by listed companies with regard
to their top executive salaries and appointments, the government has come out with an
exhaustive checklist for documents required to be filed in such cases.
The release of this 10-page checklist by the corporate affairs ministry comes at a time
when there is a growing public and regulatory scrutiny of pay packages doled out by the
companies to their CEOs and other top executives.
While the US and some European countries are framing new rules to give shareholders
larger say on pay of top management personnel at listed firms, market regulator Sebi and
investor advisory firms in India have also said executive salaries should reflect the
financial performance of the companies.
India largely follows a disclosure-based regulatory regime for the corporates, but strong
checks and balances are being put in place to curb the practice of unreasonable fat pay
packages, a senior official said, while adding that the new checklist is a step in that
direction.
The new checklist has been prepared after taking into account various regulatory
requirements to be fulfilled by listed companies while seeking the government approval for
matters like appointment and remuneration of top executives as also their pay hike, hiring
of foreign nationals in leadership roles, recruitment of relatives of directors, among
others.“This is for the first time that the ministry has come out with an exhaustive list of
procedural guidelines for executive remuneration. While these guidelines are already in
place, this is an exhaustive checklist and takes into consideration various kinds of
scenarios,” the official said.

2. The move is aimed at fostering better corporate governance practices at the companies --
an issue where Securities and Exchange Board of India (Sebi) is also deliberating over
wide-ranging changes in the relevant regulations.
While a proposal is underway to put in place a revamped set of corporate governance
regulations, Sebi Chairman UK Sinha last week said it is not fair for top executives to get
higher compensation at companies that are not performing well. Sinha, however,
emphasised that regulations would continue to remain largely disclosure-based and any
disruptive norms were unlikely to be forced on the firms.
In recent times, there have been increasing concerns about corporate governance
practices at various companies and regulators are mulling over various steps to ensure
that the investors' interest remains protected. As per the new checklist, a listed
company seeking higher pay for its board member and other top executives would need to
furnish certificate stating that it has not defaulted on debt repayments. If there has been a
default, then the firm has to submit a no-objection certificate from the lender about the
proposed pay hike. Other documents required include those stating details of turnover, net
profit/loss, dividend payout and effective capital for the last three financial years. Such
information should be duly certified by a chartered accountant.
The company needs to provide “full and proper justification in favour of the proposal” to
increase executive pay. Also, it needs to provide a comparative analysis in terms of
remuneration practices in the industry, while taking into account the size of the company,
the profile of the position as well as that of the concerned person, among others.
According to an official, the checklist would help the ministry keep a better check on the
companies' compliance to the relevant regulatory frame work for executive remuneration,
while it would also help in speedy disposal of the applications filed by the companies in
these matters. “There have been instances where the ministry had to do back-referencing

3. of details about companies seeking approval for managerial remuneration since all
required information were not furnished. This list would help the expediting the process for
companies as they will be aware about the requisite information before seeking various
approvals with regard to executive pay,” he added. The corporate affairs ministry has said
the checklist is to ensure that companies provide all the requisite information at the time of
making statutory applications under different sections of the Companies Act 1956.
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