The Royal Bank of India (RBI) has proposed changes to its executive pay guidelines for financial institutions and will accept comments until 31 Mar 2019. The changes aim to better align the RBI guidelines with the international Financial Stability Board’s Principles for Sound Compensation Practices and Implementation Standards.
Highlights of the proposed changes are:
- At least 50% of compensation should be variable.
- Employee stock ownership plans (ESOPs) should be included as a component of variable pay.
- Variable pay should be capped at 200% of fixed pay.
- At least 50% of variable pay should be via a noncash component.
- A compulsory deferral mechanism for variable pay would be required, regardless of the amount.
- Malus/clawback would be mandatory in certain circumstances.
New quantitative and qualitative criteria would identify “material risk takers.”
- Information on Proposed Guidelines (RBI, 25 Feb 2019)
- Guidelines on Compensation of Whole Time Directors, Chief Executive Officers, Risk takers and Control Function Staff (RBI, 13 Jan 2012)
- Principles for Sound Compensation Practices (FSB, 2 Apr 2009)
- Implementation Standards (FSB, 25 Sep 2009)