05 August 2010
The remuneration that can be paid to the ID is given by clause 132 (6), according to which an ID is not entitled to any remuneration, other than sitting fee, reimbursement of expenses for participation in the board and other meetings and profit-related commission and stock options as may be approved by the members. Further, clause 176 (1), that corresponds to existing section 309 of Companies Act, specifies that any director who is neither WTD or MD can be paid remuneration only in form of fee for attending board meeting and profit related commission. The clause 176(2) also states that if any director draws or receives directly or indirectly by way of remuneration, any sum in excess of the amount under sub-section (1), he shall refund such sum to the company within thirty days.
The Clause 49 prescribes that IDs can be paid any fee and stock options fixed by board with prior approval of shareholders in general meeting. Approval for sitting fees in not required if made within limits of Companies Act, 1956. As per current stipulation of Companies Act, an ID earn up to Rs. 10000 or Rs. 20000 depending upon company, as sitting fee for each meeting of board of committee thereof. Under Sec 309, commission to non-executive directors including independent, cannot exceed 1 percent of net profit if company has MD/ WTD/ Manager, otherwise the limit is 3 percent.
The new Bill now allows the company and its shareholders to fix sitting fees and profit related commission paid to IDs without any capping. As for stock options – there is no limit, just approval of board members. However, the remuneration paid directors be disclosed in annual return of company, as per Clause 82 (g).These current provisions provided in Bill are welcome note, as adequate compensation is must to attract new talent and quality participation. But how much is too much?, so that real independence is not compromised. Combine Code of UK may be give some answer, where compensation to IDs is also linked to their time commitments.
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