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Arun S

New Delhi, Nov. 3 The Corporate Affairs Ministry has for the first time begun a sector-wise assessment on the cap on managerial pay. This comes in response to representations on the issue.

Currently, the remuneration for directors and managers put together cannot exceed 11 per cent of a company’s net profits. This cap applies to companies cutting across all the sectors.

“We are holding discussions with companies in different sectors that have an issue with the cap. Some companies, like Reliance Industries Ltd, did not have to apply for our consent, because they were within the limits on managerial remuneration. But some others want to exceed the present cap for a variety of reasons. It is difficult to compare apples and oranges. Therefore, we have decided to look at it (managerial pay) sector-wise,” the Corporate Affairs Minister, Mr Salman Khursheed, told Business Line.

This new exercise is to understand sector-specific concerns to evolve a managerial remuneration approval system that is rational, objective and transparent, he said, adding that it would help companies plan better and in turn be more transparent.

The Ministry will study presentations including those made by the Forbes group, Honda Siel and the Hinduja group, official sources said, adding that similar presentations will be made by some more firms.

The Government is also looking at the recent global developments on managerial remuneration. “Like in the US the cap is mostly focused on the financial sector and sectors like automobiles bailed out by the Government. But the scope of sector-wise assessment is wider in Europe,” Mr Khursheed said.

“The sector-wise assessment is not to bring out separate guidelines. The idea is companies applying for excessive remuneration should know the principles guiding remuneration and the leeway available to them,” the Minister said.

The existing system of Government approval for managerial remuneration exceeding the cap will continue till the new Companies Bill becomes an Act, he said.

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