Business Today

No need for govt approval to decide pay of top bosses in public companies

The Companies Act sets certain limits regarding pay for the managerial personnel of public companies, which are generally subject to stricter corporate governance requirements and have more than 200 members.

twitter-logo BusinessToday.In   New Delhi     Last Updated: September 14, 2018  | 00:00 IST
No need for govt approval to decide pay of top bosses in public companies

In line with the Modi government's promise of minimum government, maximum governance policy, the Ministry of Corporate Affairs yesterday announced that public sector companies will no longer need the government's nod for handing out fat pay cheques to its top brass. As per official data, there are more than 70,000 public companies.

The approval of the "central government shall no longer be required for the payment of remuneration to managerial personnel [in excess of 11% of the net profit of a company]," the ministry said in a release. The ministry added that in such cases, only the approval of shareholders-at least 75% vote-by way of a special resolution would be required. The amended norms have come into effect from September 12.

The Companies Act sets certain limits regarding pay for the managerial personnel of public companies, which are generally subject to stricter corporate governance requirements and have more than 200 members.

The limits are calculated against a company's net profit. The cap is 1% for non-executive directors put together but it can go up to 3% subject to certain conditions. For whole time directors and managing directors, their total pay can be up to 10%. Combining both, the total remuneration limit would be 11%. Till now, any payment of managerial remuneration in excess of this cap required the ministry's approval and the revised norms do away with it.

There's one important pre-condition. In case a company has defaulted on its dues to any bank, financial institution or non-convertible debenture holders, the approval of the concerned lender would be required before the remuneration proposal is put up to the shareholders.

With this development, the ministry said "all pending applications submitted to the ministry for approval of proposals for payment of managerial remuneration in excess of the limits laid down, would automatically abate and companies are free to obtain requisite approvals for those proposals, from the shareholders within one year".

It added that all the relevant changes have also been notified to Schedule V of the Companies Act that mainly pertains to eligibility and remuneration of directors. Now, as per the revised norms, the MR-2 e-form need to be filed only for appointment of managerial personnel, no longer for remuneration issues.

Talking about the amended norms, Corporate Affairs Secretary Injeti Srinivas said that the revised norms would allow shareholders to make "rational and viable decision" with respect to managerial remuneration. The long-awaited and much-cheered move is aimed at providing ease of doing business to the law-abiding corporates of this country.

With PTI inputs

Youtube
  • Print

  • COMMENT
BT-Story-Page-B.gif
A    A   A
close