Yesha Yadav

Executive Compensation in India

We present an introductory regulatory and empirical analysis of executive compensation in listed companies in India.Our descriptive overview of levels and trends leads to several interesting conclusions. First, executive pay in the echelon representing the largest firms is several times greater than in smaller firms. It also includes a much greater component of variable pay, is much more sensitive to stock market movements, and exhibits much greater dispersion both across time and across firms. For this echelon of the largest firms, the features of executive pay are not qualitatively different from those documented for the US by Frydman and Saks (2010). However, for even upto the 75th percentile firm by size, there is little variable component in executive pay. CEO pay is considerably greater than the pay other executive directors (i.e., CXOs), and the ratio of CEO to CXO pay also displays high dispersion both across time and across firms. CXO pay displays a much lower variable component and much lower sensitivity to stock market movements, and hence a much lower variation across time. The real values of both CEO and CXO compensation have been following a sharply increasing trend in recent years in India. Second, CEO and CXO pay is considerably higher (about 30% for both CEOs and CXOs) for firms that are part of business groups, and increase significantly with the proportion of promoters’ equity. These results are qualitatively similar to the inferences that currently exist in the literature for the impact of vertical agency costs on executive pay.Questions must now be asked to better assure that international standards implemented in India are tailored and fit for the specific risks generated, such that disclosure, corporate oversight, and say-on-pay, are meaningful and fulfill the intended regulatory rationales.

Fintech and the Innovation Trilemma

Whether in response to robo advising, artificial intelligence, or crypto-currencies such as Bitcoin, regulators around the world have made it a top policy priority to supervise the exponential growth of financial technology (or “fintech”) in the post-crisis era. However, applying traditional regulatory strategies to new technological ecosystems has proved conceptually difficult. Part of the challenge lies in managing the trade-offs that accompany the regulation of innovations that could, conceivably, both help and hurt consumers as well as market participants. Problems also arise from the common assumption that today’s fintech is a mere continuation of the story of innovation that has shaped finance for centuries. This Article offers a new theoretical framework for understanding and regulating fintech by showing how the supervision of financial innovation is invariably bound by what can be described as a policy trilemma. Specifically, we argue that when seeking to provide clear rules, maintain market integrity, and encourage financial innovation, regulators have long been able to achieve, at best, only two out of these three goals. Moreover, today’s innovations exacerbate the trade-offs historically embodied in the trilemma by breaking down financial services supply chains into discrete parts and disintermediating traditional functions using cutting edge, but untested, technologies, thereby introducing unprecedented uncertainty as to their risks and benefits. This Article seeks to catalogue the strategies taken by regulatory authorities to navigate the trilemma, and posits them as operating across a spectrum of interrelated responses. The Article then proposes supplemental administrative tools to support not only market, but also regulatory experimentation and innovation.