The Centre’s recent decision to double managerial remuneration by amending the Companies Act will provide more room to reward performance of managers, says experts.
Mahavir Lunawat, Group Managing Director, Pantomath Advisory Services Group and the Council Member of The Institute of Company Secretaries of India, felt that barriers to remuneration had been removed.
“It aims to achieve multiple objectives such as ease of doing business, reduced compliance costs and incentivising measures of talent acquisition and retention. The impact of the amendment is quite positive particularly on start-ups and growing businesses which can now design their managerial pay packages more flexibly with reduced government intervention,” Lunawat said.
“Steps like removal of a central government approval for payments beyond certain thresholds, increasing the thresholds, easing the compliances etc. will ensure that good talent can be hired, paid well and retained which ultimately can help in organizational growth,” said Tejesh Chitlangi, Partner IC Legal.
The government’s notification also provided that the above limits could be doubled if the resolution passed by the shareholders was a special resolution, a resolution that requires at least 75 per cent votes in its favour to be passed.
For a period of less than a year these limits would be pro-rated, it added.
“It makes a lot of sense to relax the salary cap, remove governmental approval which was without much value addition, sanitise Schedule V (schedule containing managerial remuneration in the Companies Act) for conflict of interests of managerial person,” summed up Sumit Agrawal, founder, Suvan Law Advisors.
“Also prescribing revised conditions for availing the benefit of new remuneration limits, will enable companies to hire better talent for its managerial posts while keeping interest of shareholders in mind,” the former legal advisor to SEBI added.