‘Remuneration for key managerial personnel should be proportionate to value addition’

Raghavendra Rao Mumbai | Updated on March 12, 2018 Published on May 13, 2015

Rishikesh Gagan Vyas, Chairman, Western India Regional Council of theInstitute of Company Secretaries of India

The compliance requirement under the Companies Act, 2013 is not a cost but an essential ingredient for companies to showcase their high standards of governance, says Rishikesh Gagan Vyas, Chairman, Western India Regional Council of the Institute of Company Secretaries of India. In a interaction with BusinessLine, he provided interesting insights into the Act. Edited Excerpts:

Compliance costs for corporates have substantially gone up. What is your take?

Compliance is not a cost. It is a health check-up of a company. It is akin to following traffic rules while driving where negligence leads to accidents.

After the new Companies Act came into being, there are many liabilities that a company, its board and key managerial personnel (KMP) are subject to especially on issues related to goodwill, reputation, governance and ethics.

For every class of investors, be it venture capital, private equity, institutions, retail and the like, good governance is a given and it all starts with compliance.

What should be the remuneration for a KMP?

Remuneration should be proportional to the value addition brought in by the KMP. For instance, a company secretary is responsible for compliance as well as the governance process in a company. A company secretary is required as he knows the way both these processes are done besides having the capability to handle secretarial audit. Demand is rising and so is the remuneration.

Should there be a minimum age for a KMP?

Age is just a number; ultimately, it is the board’s decision to appoint a KMP. Knowledge of the ground reality and an inside out knowledge of the business is required.

The liabilities on a KMP can be as stringent as a class action suit. Companies should also see to it that all their KMPs report only to their board and not have reporting structures such as the Company Secertary reporting to the CFO or the MD / CEO. This weakens the purpose of the Companies Act.

What is your take on the company secretary of several listed companies quitting last year?

Some would have thought it would be better to quit and save their careers in a few cases where there were problems. It is very easy to run away from responsibility.

However, there is provision in the Act for reporting frauds to the board / independent directors. One may also draw attention on irregularities to the auditors or even during secretarial audit.

How should a Company Secretary go about dealing with a celebrity board member?

The Company Secretary should draw their attention to the liabilities they will be subject to if they do not perform their duty as a board member. They should also explain the value they would bring to the board through meaningful handling of issues

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Published on May 13, 2015
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