The Hindu Business Line : `New company law likely to retain control over director remuneration'

THE final version of the proposed new company law is likely to retain some form of control on the remuneration to directors in companies, according to company law expert, Mr Shardul Shroff, who is partner of law firm, Amarchand Mangaldas & Co.

Speaking on `Clause 49-Context to Corporate Governance' at a conference organised by Alliance India, Mr Shroff said that remuneration of senior management continued to be a "big problem" globally as shareholders keep making excess payments to persons in management. A debate is currently on in the country as to whether the Government should continue to regulate remuneration of senior management of companies or whether the shareholders (of companies) alone should be permitted to decide on the quantum of pay.

"I think the balance needs to be drawn and there has to be some form that is not only disclosure-based but linked to the lowest salary in the company. Good governance mandates that there should be some linkage between the highest paid executive and the lowest paid executive and not just be based on fanciful figures," Mr Shroff said.

He added that the various committees set up in the recent past have had differing views on the issue.

While the Naresh Chandra Committee's and the recently set up Irani Committee's recommendations were based on the principle that this was a matter that shareholders alone should decide, there was a counter view from the Narayana Murthy Committee, which called for a linkage between the highest paid executive and the lowest paid executive.

Mr Shroff also said that there is still an overhang of certain past legal decisions where the salaries and remuneration of directors were correlated with the salaries of Secretaries to the Government of India.

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