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Proxy advisory firm raises a red flag over Harsh Mariwala’s remuneration

Proxy advisory firm raises a red flag over Harsh Mariwala’s remuneration

“Commission paid to Mr. Harsh Mariwala is more than 10 times the average commission paid to other Non-Executive Directors on the Board,” states the report by Stakeholders Empowerment Services (SES) though it adds that his reappointment is fully compliant with law and there are no concerns on merit as well.

Proxy advisory firm raises a red flag over Harsh Mariwala’s remuneration Proxy advisory firm raises a red flag over Harsh Mariwala’s remuneration

Proxy advisory firm Stakeholders Empowerment Services (SES) has highlighted the fact that FMCG major Marico’s founder and chairman Harsh Mariwala is being offered a remuneration of ₹3.94 crore even as he seeks a reappointment as a non-executive director. 

In a report released ahead of Marico’s Annual General Meeting (AGM), which is scheduled on Friday, August 5, the proxy advisory firm has advised the shareholders of the FMCG major to vote against the resolution. 

To be sure, SES believes that the reappointment of Mariwala is fully compliant with law and there are no concerns in terms of merit as well. There is only a “governance concern”, it says while adding that the “remuneration is skewed in favor of Mr Harsh Mariwala”. 

“Commission paid to Mr. Harsh Mariwala is more than 10 times the average commission paid to other Non-Executive Directors on the Board. Out of total commission of Rs 6.77 Crores, a major chunk of approx. ~58% i.e., Rs 3.94 Crores is being paid to Mr. Harsh Mariwala,” stated the report. 

It further adds that the remuneration of the other two promoter directors – Rajendra Mariwala and Rishabh Mariwala – is only around ₹35 lakh. 

“SES is of the opinion that the commission paid to Mr. Harsh Mariwala is excessive compared to that of other non-executive directors on the Board of the Company,” states the report. 

While Harsh Mariwala directly holds a stake of 2.17 per cent in Marico, the total promoter holding is a little over 59 per cent – held through individuals and trusts.  

The company, meanwhile, has said that the remuneration of Mariwala is in compliance with all the applicable laws and should be seen in the light of his role and responsibilities. 

“Mr. Harsh Mariwala, Founder of Marico and Chairman of the Board, has been instrumental in guiding the Company’s long-term strategic imperatives, improving Board effectiveness and the CSR agenda. The remuneration of Mr. Mariwala for FY22, as previously approved by shareholders at the 33rd AGM held in 2021 with significant majority of 90% of votes cast in favour, is in compliance with applicable provisions of Companies Act, 2013 and SEBI Listing Regulations, and commensurate with his roles and responsibilities as Chairman of the Board,” said a company spokesperson, while responding to an email query by Business Today. 

As per the company's filings with the exchanges, it recorded a net profit of Rs 1,163 crore in FY22, which was marginally higher than the previous year's Rs 1,106 crore. The total income for FY22 and FY21 was pegged at Rs 7,857 crore and Rs 6,683 crore, respectively. 

Meanwhile, another resolution that the proxy advisory firm has advised shareholders to vote against is the remuneration payable to cost auditors as it feels that the “cost audit fee (is) significantly lower than the minimum suggested fee by ICAI (Institute of Chartered Accountants of India).” 

Company has not disclosed portion of the turnover that is subject to cost audit, it said while stating that the remuneration for Ashwin Solanki & Associates has been fixed at Rs 10 lakh. 

“Disclosure of the Audit Fee proposed to the Cost Auditor alone, becomes irrelevant if shareholders are unable to compare it with the scope of Cost Audit,” stated the report. 

Meanwhile, SES has also advised shareholders to vote in favour of four other resolutions during the AGM. The resolutions pertain to adoption of standalone & consolidated financial statements, confirmation of interim dividend, reappointment of B S R & Co as statutory auditors and revision in the remuneration paid to Saugata Gupta, MD & CEO of Marico. 

On Thursday, shares of Marico rose over 2 per cent to close at Rs 531.65 even as the benchmark Sensex lost marginal ground.