The variable pay of CEOs, managing directors and executive directors of insurers must be based on their performance vis-à-vis that of the industry, said the insurance regulator. It also asked them to set an upper limit for bonuses so that boards do not hand out special deals to top executives.
Bonus of some of the CEO’s has been refused to be approved by the Insurance Regulatory and Development Authority of India (IRDAI) in the life insurance segment, as the proposals did not quantify the maximum payable amount, making it hard to analyze between fixed and variable pay.
The sources also informed that the bonus proposals had also come after the end of the financial year. The RBI previously proposed to prescribe a threshold for variable compensation for the CEOs and whole-time directors of private and foreign banks.
Source said, “IRDAI has issued a fresh circular asking the companies to comply with the compensation structure and it does not want them to approach the regulator after the end of the financial year.”
After withholding on signing off on last year’s bonuses, a detailed note has been sent on regarding computing of bonuses and what factors need to be taken in before finalizing the pay outs.
As per the information received from the sources, requests for revision of remuneration or any of the fixed pay and variable components will not be entertained by the regulator after the end of the year.
The pay-bonus proposals will require to clearly specifying the fixed pay and variable components and the maximum variable pay as well. Where any variable pay component is structured as noncash, such as options, the basis for arriving at the number of such options together with the granting price or date must be specified.
“While the proposals need to clearly specify the fixed pay and variable components as also the maximum variable pay, it is also necessary that the performance grid/parameters together with weights are clearly specified and mapping between the performance grid, achievement matrix and applicable percentage of variable pay component is given,” IRDAI said in its circular.
