Unlisted companies having inadequate or no profits will no more be required to seek government approval for fixing remuneration of directors and CEOs, but this power will now vest with their shareholders.
"Schedule XIII (rules) of the Companies Act, 1956, is being amended to provide that unlisted companies shall not require government approval for managerial remuneration in cases where they have no profits/inadequate profits," Corporate Affairs Minister Murli Deora told reporters here.
Now, these unlisted companies can decide managerial remunerations fulfilling certain conditions like "special resolution of shareholders and absence of default on payments to creditors".
At present, managerial remuneration is approved by a resolution passed by the Remuneration Committee of a company and shareholders are informed thereafter. Companies also require a prior approval of the MCA if its exceeds a certain limit, the slab of which is calculated on the basis of the companies effective capital.
Deora said that the primary purpose of regulations over managerial remuneration is to protect stakeholders, particularly shareholders and creditors.
High salaries of CEOs have often been criticised world over especially during the global economic crisis in 2008.
Deora's predecessor Salman Khurshid had also spoken against high salaries that CEOs take home, at a time when the government was propagating austerity.
