Calling for a need to have 'corporate democracy' in the country, capital market regulator Sebi today said it is not fair for top executives to get high compensations at companies that are not performing well.

At the same time, Sebi has ruled out any 'disruptive' regulations to force anything on the companies and said that the norms would continue to remain disclosure-based.

Delivering a lecture on corporate governanceorganised by UN Global Compact Network, Sebi Chairman U K Sinha said the regulator does not spare even biggest of the promoters when it comes to breach of norms and it was this disclosure-based regime that has brought to fore many high-profile cases.

Without naming Sahara group, Sinha said it was Sebi's disclosure requirements that led to the regulator coming across the case of a large group having raised over Rs 24,000 crore from an estimated three investors.

"The group had filed for an IPO and it was during the scanning of these documents that the matter came to the light," Sinha said, while adding that that the group has now claimed that it has already refunded more than 90 per cent of the money raised from the investors in cash.

Asked about another high-profile case involving a huge loss of investor money in an IPO in 2008, Sinha said the regulator still believes that the share price should be market determined and it would be a retrograde step if Sebi fixes the price for IPOs.

Giving example of a Sebi proposal for having a safety net mechanism in IPOs to ensure some sort of capital guarantee for a small portion of investments, Sinha said a large number of responses to a discussion paper on such a step are against having such a provision and are in favour of continuing with the current practice of share price being fully market-determined.

Talking about an increase in public awareness against issues of corruption and bad governance, Sinha said similar changes are taking place in the corporate world.

"People want greater say on decision making of companies. CEOs can not expect their ESOPs and bonuses to continue to rise if there is an malfeasance at the company. We need to change in the way corporate governance is practiced today," he said.

"Accountability is going to be the most important aspect of corporate governance going forward. People will soon demand a corporate democracy and we need to move beyond purely rule- based corporate governance," Sinha added.

Sebi chief further said that the enforcement actions should act as deterrents and the level of penalties are already going up and some of the top names are being penalised, which could not have been even imagined till a few years ago.

Sinha said there will be a furore among the people would if the politicians or government leaders are paid huge salaries at a time when a country is going through bad times. 

"Same principles apply to the corporate world also. If a company's performance is not good and its top executives are getting higher bonuses and ESOPs, that needs to be checked," he said, while giving example of Sarbanes-Oxley Act in the US. 

On steps taken by Sebi for better corporate governance practices, Sinha said the regulator is addressing issues related to independent directors, audit committees, top management personnel, board committees and disclosures, among others. 

"Disclosures are going to be more and more important and they need to be timely and correct. The underlying idea is that the shareholder democracy needs to be taken to the next level and if a company is lacking on it, it is bound to suffer," Sinha said.

At the same times, the markets would reward those firms that manage to build strongcorporate governance systems. On abusive related party transactions, Sinha said it is a matter of great concern, but the regulator's focus on this front is now shifting away from punishing the company to punishing the individuals who indulge in wrongdoings. 

On issue of disclosures about pledged shares, Sinha said that there are many companies "with big legal acumen" who come out with new instruments to hide any pledging or encumbrance, but they cannot hide it from the regulatory oversight. He said the disclosures about pledged shares is very important as it was such transactions that led to Satyam scam. 

Talking about public uproar in Tahrir Square (Cairo) and Ram Lila Maidan (Delhi), Sinha said the society has come a long way and the rallies today do not need people to be transported, paid or given food as the young crowd comes out on the streets on their own. 

"We have come a long way from Official Secrets Act to the time of Right to Information Act...People want accountability today," Sinha said. (Economic Times)