85% execs want CEO pay linked to corp performance: KPMG

At a time when corporate governance practices are a hot topic, a majority of Indian firms believe there is a need to evaluate performance of board members and significantly link compensation packages of CEOs to company performance, a KPMG report says.     

According to the report based on a corporate governance poll by global consultancy KPMG, two-third of the respondents are of the view that there is a scope for improvement when it comes to board members having the right information and enough time to discharge their duties.     

"85 per cent of respondents think the remuneration of Chief Executive Officers (CEO) should be significantly linked to company performance. A significant majority would also prefer greater empowerment to independent directors," the report stated.     

A key finding that emerged from the poll was the need for exemplary enforcement and stronger regulatory review and nearly three-fourth of the respondents (73 per cent) believe that risk management practices need to be improved.     

Most respondents believe while steps at introducing code of conduct and whistle blower policy have been taken, there still exists a significant need to enhance integrity and ethical values in the larger eco-system, the report stated.

"If an organisation is to be able to stand for its integrity and be accountable, itwill certainly augur well to evaluate performance of board members, link compensation packages of CEOs inextricably to company performance," KPMG India Executive Director and head (Governance, Risk and Compliance Services) Neville Dumasia said.     

"And have objective and independent whistle-blowing mechanisms to deal with ethical wrong doing. These are areas where India Inc needs to up the ante considerably," he added.     

Meanwhile, 72 per cent of the respondents believe it is necessary for an independent and transparent process to evaluate performance of board members.The report further stated that 35 per cent of respondents consider weak oversight and monitoring as the biggest risk to corporate governance, 21 per cent perceive management override as a greater risk.     

The poll, conducted between late November 2008 to early January 2009, roped in close to 100 respondents comprising CEOs, CFOs, independent directors and business leaders from business spheres as diverse as private equity, financial services and manufacturing.     

Further, training of board members and board performance evaluation should be a key requirement in the context of heightened governance challenges.

While steps have been taken to introduce the code of conduct, there exists a significant need to enhance integrity and ethical values in the larger corporate ecosystem, the report added.