DCA tightens pay rules for family directors

NEW DELHI: Listed companies will have to disclose the proportion of their total annual turnover being paid as remuneration to their promoter families. This disclosure is mandatory to obtain statutory clearances for managerial remuneration and appointments from the government. The DCA has issued a fresh, more stringent set of internal guidelines to be followed by its officials for approving the appointment of whole-time directors and managing directors from the promoters'' families. The guidelines also cover the clearances for the remuneration paid by companies with inadequate profits to their directors and managers employed from the promoter families. The guidelines focus mainly on listed companies which are not closely held, a senior DCA official told ET . â€œWe do not wish to be as strict with closely-held companies. They may distribute their profits to their promoter-employees. The idea is to protect the small investors in companies where promoters corner up to 30% of the turnover in a year of losses,â€� he added. The number of approvals being granted currently will certainly go down, DCA officials said. They, however, clarified that the guidelines will be used for dealing with applications from corporates only in a prospective fashion. Under the provisions of the Companies Act, companies paying their employees in excess of limits prescribed on the basis of turnover and profitability have to seek DCAâ€™s prior-approval. Appointment of managing/whole-time directors also requires DCAâ€™s clearances. The department is very strict while granting such approvals and only companies that are generally profit-making and have posted losses in a particular year due to unavoidable reasons such as an industrial slow-down are granted any relaxation. Nevertheless, it receives a large number of applications for relaxation. According to data compiled by the DCA, it had disposed of 1,011 applications pertaining to appointments and remuneration of corporate directors during 2000-01. On March 31, 2001 it still had 200 applications from various companies pending. Before granting the approvals, DCA officials will ascertain if the selection committee was indeed dominated by independent directors and experts from outside.

DCA tightens pay rules for family directors

Listed companies will have to disclose the proportion of their total annual turnover being paid as remuneration to their promoter families.

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