Ranbaxy seeks govt nod for excess pay to directors

NEW DELHI: 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 deal attracted investors ire and regulators questioned the role of independent directors.

"Till Satyam, they used to take sitting fees and remained on the boards of 4-5 companies without proper knowledge of their functioning. But now they are preferring to forego their fees rather than tarnishing the reputation they have built over a period of years," Haldea added.

Experts said it is high time regulators steer clear and define the role and responsibilities of independent directors and also outline the penalties that would be imposed if they fail to fulfill them.

A recent KPMG poll also highlighted the need for greater empowerment of independent directors.

"So long as we continue to have a process wherein independent director appointments are largely driven by promoters, empowerment of independent directors and protecting minority shareholder interests will continue to be areas of concern," KPMG (India) COO and Head of Advisory Services Richard Rekhy said.

"... It may be time for formation of an independent body which may be funded by listed companies and whose primary objective would be to ensure registration of all independent directors.

"This would ensure that all companies requiring to appoint independent directors have access to one common platform which would match skill sets to their requirements," Rekhy added.