Disclosure of Remuneration in Board Report [(Section 197 (14) and Rule 5(1)5(2)companies(appointment & remuneration) rules ,2014
Every listed company shall disclose in the Board’s report, the ratio of the remuneration of each director to the median employee’s remuneration and such other details as may be prescribed. The central government through rules prescribed the following disclosure by a listed company in its Board’s report:
(i) the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;
(ii) percentage increase in remuneration of each director and CEO in the financial year;
(iii) percentage increase in the median remuneration of employees in the financial year;
(iv) number of permanent employees on the rolls of company;
(v) explanation on the relationship between average increase in remuneration and company performance;
(vi) comparison of the remuneration of the Key Managerial Personnel against the performance of the company;
(vii) variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial and previous financial year and percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies, and in case of unlisted companies, the variations in the net worth of the company as at the close of the current financial year and previous financial year;
(viii) average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;
(ix) comparison of the each remuneration of the Key Managerial Personnel against the performance of the company;
(x) the key parameters for any variable component of remuneration availed by the directors;
(xi) the ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year;
(ix) affirmation that the remuneration is as per the remuneration policy of the company.
The board’s report shall include a statement showing the name of every employee of the company who-
(i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh rupees;
(ii) if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh rupees per month;
(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.
The above statement shall also indicate - (i) Designation of the employee; (ii) Remuneration received; (iii) Nature of employment, whether contractual or otherwise; (iv) Qualifications and experience of the employee; (v) Date of commencement of employment; (vi) The age of such employee; (vii) The last employment held by such employee before joining the company; (viii) The percentage of equity shares held by the employee in the company within the meaning of sub-clause (iii) of sub-rule (2) above; and (ix) Whether any such employee is a relative of any director or manager of the company and if so, name of such director.
The particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than 60 lakh rupees per financial year or 5 lakh rupees per month, as the case may be, shall not be included in the above statement of the Board’s report but such particulars shall be filed with the Registrar of Companies while filing the financial statement and Board Reports and such particulars shall be made available to any shareholder on a specific request made by him during the course of annual general meeting wherein financial statements for the relevant financial year are proposed to be adopted by shareholders.
An analysis of the pay ratio disclosures of companies was conducted by In govern research, bengaluru, a corporate governance research and advisory firm
The analysis show that the top brass of nifty companies stood at
9 cr,whereas the average Median employee remuneration was Rs
At the top of the chart comes the Lupin Ltd promoters and then Hero MotoCrop promoters who had 777 and 600 times higher remuneration than the average employee of their company while average remuneration is Rs 9cr.
Many companies have not disclosed this information in annual report and some companies having different accounting period have excused themselves.
The remuneration of 11 directors was more than 400 times the median employee remuneration of their companies.
Shareholders activism is required. In Tata motors case the shareholders did not consent to companies’ resolution.