Domestic pharma major Ranbaxy, now owned by Japan's Daiichi Sankyo, cut the remuneration to its directors by about Rs 3.5 crore in last fiscal, but the payout still exceeded the limits prescribed by the government.
The company, whose director remuneration fell to Rs 27.73 crore in 2008 from Rs 31.23 crore in previous year, has sought the central government's approval for waiving the Companies Act requirements regarding the excess payout.
The company paid higher salaries and allowances in 2008 to its directors, including its Chairman, CEO & MD Malvinder Mohan Singh, but the total payout declined as no commission was paid to executive directors in view of the loss incurred by the company.
"Remuneration of Executive Directors is decided by the Board based on recommendations of the Compensation Committee as per the remuneration policy of the Company, within the ceiling fixed by the shareholders.
"In view of the loss incurred by the Company for the financial year ended December 31, 2008, the Company has applied to the Central Government for the remuneration of the Executive Directors and the approval is awaited," Ranbaxy said in its latest annual report.
The company further said that its auditors have noted that "the company has paid managerial remuneration to its directors in excess of the limits under the Companies Act, 1956."
The auditors in their report said that the company paid Rs 27.728 crore as managerial remuneration to its directors, which is in excess of the limits under the Act.
"Had the company accounted for the remuneration in accordance with the Act, the loss after tax for the year would have been lower by Rs 18.303 crore and the loans and advances would have been higher by Rs 27.728 crore."
The company said that "the explanation to this qualification (note by the auditor) is that the company had adequate profits for the past many years and thus has been paying remuneration to its managerial personnel within overall limits as specified under the Act.
"However, due to sharp erosion in rupee value and import alert by US FDA, the company incurred losses in the second half of the year 2008. In view of this, the managerial remuneration paid during the year has exceeded the limits prescribed under the Act," Ranbaxy said, adding it has sought approval of the Central Government for waiver of excess remuneration paid.
The salaries and allowances to the directors increased to Rs 22.908 crore in 2008, from Rs 14.95 crore in 2007, while directors' fee increased to Rs 24.6 lakh from Rs 24.2 lakh and the perquisites declined to Rs 13.4 lakh from Rs 75.1 lakh.
However, the company did not pay any commission to its directors in 2008, as against a payout of Rs 14.4 crore in 2007. The company paid Malvinder Mohan Singh about Rs 19.29 crore in salary and allowances, while Rs 12.08 lakh was paid as perquisites and Rs 4.3 crore as retiral benefits. Besides, he was also granted two lakh stock options on December 19, 2008, at an exercise price of Rs 219 a share.
In 2007, Singh, then CEO and MD, was paid Rs 10 crore in commission, while his total payout stood at about Rs 19.59 crore, after taking into account salary, allowances, perquisites and retiral benefits.
Singh was appointed as Chairman, CEO and Managing Director effective December 19, 2008, for a period of five years.
Ranbaxy's sales rose nine per cent to Rs 7,295.4 crore in 2008. However, it recorded a loss after tax of Rs 934.95 crore in 2008, as against a profit of Rs 786.75 crore in 2007.
The loss was mainly attributed to foreign exchange losses worth more than Rs 1,000 crore and adverse impact of the US drug regulator's import alert on two of its plants in India.
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