When it comes to rewarding promoter-executives, domestic companies hardly take a look at their profit-and-loss accounts.
Despite earning meagre profits, or at times even falling deep into the red, they go all out in paying their top executives, particularly the kin of the promoters, hefty remuneration packages and commissions on sales besides the normal perks.
Escorts and Tata Rayerson have requested the department of company affairs (DCA) for a waiver from a clause under Schedule XIII of the Companies Act, 1956, that disallows companies to pay commissions to their managers over and above the permissible salaries and perks in years of losses or insufficient profits.
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Escorts has asked for a waiver on the grounds that it registered sufficient profits to pay commissions every year with the last fiscal being an exception. The department had turned down the request once earlier, but the company has now written back saying that it has already paid its executive director, Nikhil Nanda Rs 27 lakh as commission and that he has paid income tax on the amount.
Nanda received Rs 27 lakh as commission over and above his salary of Rs 60 lakh and other perks. A decision on the request is pending.
Similarly, Tata Rayerson had pleaded with the department for permission to pay Rs 6 lakh as commission to its senior executive. Under the provisions of Schedule XIII, DCA has allowed the company to pay Rs 4 lakh over and above the salary.
Analysis by the department has revealed that 50 per cent of the companies that register profits do not declare dividend for their shareholders.
They, however, ask the department for clearances of pay packages for their promoter employees that are in excess of the permissible caps for managerial remuneration levels prescribed by DCA.
In fact, a waiver from the clause disallowing commissions in case of losses or insufficient profits is sought by almost all companies while seeking clearances for the monthly remuneration itself.
DCA allows a maximum salary of Rs 24 lakh per annum. Firms allow perks including fully-paid overseas vacations for employee families, education, medical benefits and travel allowances.