The Confederation of Indian Industry (CII) has urged the government to enhance the managerial remuneration of non-whole-time directors. With the ever-increasing responsibility on the non-whole-time directors, the one per cent of the net profits allocated for them seems to be on the lower side, CII pointed out.
As per Section 198 of the Companies Act, the maximum managerial remuneration permissible is 11 per cent of the net profits. Out of the 11 per cent, the first 5 per cent is for the managing or whole-time director, the next 5 per cent is for the second managing director if there is one and the rest 1 per cent is for the other non-whole-time director. Elaborating further, CII has pointed out that with the Sebi corporate governance code's requirement for listed companies to have independent directors in the board, much more obligation has been imposed on the non-whole-time directors. Therefore, this new breed of professionals need to be adequately rewarded for the pain and trouble they take, according to the confederation.
CII has said adequate compensation is absolutely essential to motivate the independent directors and ensure their greater involvement in the company.
As for the companies making losses or inadequate profits, CII has said it is necessary to define inadequate profits. With the present cap on remuneration it is practically impossible to attract the right talent which is required to turnaround loss-making companies, CII said. It is also necessary that the requirement of the central government
