November 18, 2013
India’s New Pay Ratio Disclosure Requirement
– Broc Romanek, CompensationStandards.com
Recently, Soladi’s Cristina Ungureanu brought my attention to the fact that India had beaten the US to the punch in adopting a pay ratio disclosure law, as noted in this article. This is in India’s just released new Companies’ Act which includes many other governance-related rules. Here is the new law:
“(12) Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed.” (p. 121)
The Act has been approved by the Parliament, published in the official gazette and India’s Government has initiated the process to implement it in consultation with concerned regulatory Authorities and other stakeholders. In this regard, I understand draft rules needed to be placed for public comments within the implementation phase with the Indian Ministry of Corporate Affairs (MCA). I believe the matter was actually supported by the Indian regulators (SEBI in particular) and the public, given that CEO – employee pay levels have been considered uneven (think of India’s population which is average or below).
The comments to the new Law have not been published yet, so if – and when – they are, we can see the reaction from institutions. Bear in mind that corporate governance in India is only now emerging, taking more of a rules approach rather than a principles-based one.