Stocks

SES asks Max Financial shareholders to reject Analjit’s compensation

PALAK SHAH Mumbai | Updated on April 27, 2021

Analjit Singh, founder of Max Group

Max Financial Services terms report as inaccurate

Proxy advisory firm SES has asked the shareholders of Max Financial Services (MFS) to vote against the company’s proposal of paying a hefty compensation to its non-executive chairman Analjit Singh. However, if the proposal is accepted by the shareholders, Singh could earn windfall gains. SES said that it seems only Singh was contributing to the company since his commission and remuneration has been fixed so high and there were no pre-defined compensation criteria disclosed by the company.

Compensation details

MFS has proposed up to 2 per cent commission of the entire profits of the company to Singh. The company has also proposed another ₹3 crore compensation to Singh. The SES has asked the shareholders to reject this too. The proxy advisory firm observed a similar proposed resolution wherein Singh got nearly 50 per cent of the total remuneration in two other related companies including Max India and Max Ventures.

Further, SES has asked shareholders to reject a proposal by the company which seeks to pay a compensation of up to 3 per cent to the non-executive directors of the company. SES said the company should not pay any fee other than the sitting fee and commission based on pre-disclosed performance criteria. SES has said the company should disclose its rationale for such compensation to remove the ‘conflict of interest’ and maintain the independence of non executive directors. MFS, an insurance company, made a profit of around ₹272 crore for the quarter-ending December 2020 alone. Considering this, the annual net profit of MFS could range anywhere around ₹800 crore and 2 per cent of this comes to around ₹16 crore.

“SES does not consider it as a prudent governance practice to distribute 2 per cent of the net profits to one person, while distributing the rest one per cent to some or all 8 non executive directors, when all 9 directorships are of non-executive nature,” said JN Gupta, founder SES and former executive director, SEBI.

NRC’s job

According to SES, the nomination and remuneration committee (NRC) is tasked with the job of evaluation and performance appraisal as also remuneration. It said the ability of NRC to decide commission payable to a promoter-director while not being able to decide for others is inexplicable, to say the least.

“It is surprising that while NRC has been able to evaluate performance of Mr. Singh and is crystal clear that he stands out and deserves to be paid total 67 percent of maximum commission allowed; yet NRC has not been able to make up its mind as to performance of rest of the board members and has not decided how much bonus must/will be paid to others. It may also be a case that some may not receive any commission. Shareholders may question the board,” the SES report said.

 

Max Financial Services spokesperson said “The advisory circulated by SES has major factual inaccuracies. Max Financial has asked shareholder approval for Promoter and Chairman’s compensation upto a maximum of Rs 3 crore. SES inaccurately reports it could be as high as Rs 16 cr. The proposed compensation is relatively conservative in comparison to other listed entities of our size."

"The Founder Chairman continues to contribute significant value to Max Financial. For instance he played an anchor role in conclusion of Max Life – Axis Entities joint venture, ensuring long term stability and growth of the Life insurance business. This has led to significant value creation for shareholder," the spokesperson added.

 Max further stated that "while other established proxy advisory firms have explained the proposal correctly in their reports, the inaccuracies in SES’s advisory, and their overlooking of our stock exchange clarification of 19th April, will create confusion in shareholders mind. We would encourage all proxy advisories to diligently follow the process of dialoguing with us to properly understand the shareholder proposals and thus advise equipped with full knowledge.”

 

 

Published on April 26, 2021

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