High promoter pay irks investors – Times of India

MUMBAI: Fat salaries of promoters and CEOs have irked shareholders and created conflict among investors over the last few years as remuneration often exceeds revenue and profit growth. An analysis of 200-odd remuneration resolutions for promoters presented in 2022 shows that about a third (68) of these would have been defeated had promoters not been allowed to vote.
The analysis done by shareholder proxy firm IiAS shows that promoters’ compensation structures almost always lack clarity with respect to the expected performance outcome. “Investor dissent has been witnessed on remuneration, including the absolute level of compensation, weak disclosures in the resolution, structure of the remuneration (in terms of its alignment to company performance), and promoter family remuneration – where there are several promoter family members on the board and holding office-of-profit positions,” it says.
Regulators must put promoter compensation to a ‘majority-of- minority’ vote, and prescribe a set of minimum disclosures that companies must make on an annual basis, and while seeking shareholder approval, it added.
In several instances, the study cites, promoters ensure that they get a flat share of the commission. For example, the executive chairman of a commodity play receives a flat 0.5% of commission, with pretty much no disclosures on expected performance measures or acknowledgement that the industry is cyclical. Therefore, when the commodity cycle turned for the better in FY22, his remuneration aggregated Rs 134 crore. This upside benefit, however, was not available to other executive directors and the employee pool.
Though there has been investor push-back in cases, promoters have the voting power to carry the ‘contentious’ resolutions through.