Regressive' changes to companies act
CII said that several issues need to be addressed in the amended Companies Act as passed in an ordinance earlier.
New Delhi: Industry chamber CII on Sunday opposed capping remuneration of independent directors in the amendments to the Companies Act 2013 calling it “regressive”.
CII said that several issues need to be addressed in the amended Companies Act as passed in an ordinance earlier. It said that any cap would be regressive to the current mechanism prescribed under the Companies Act, 2013 and Sebi regulations.
As per the proposed amendments, total pecuniary relationship of independent director with the company, its holding, subsidiary or associate company, or their promoters or directors, shall not exceed 25 per cent of his total income.
Of this, professional or any services rendered by him other than prescribed services shall not account for more than 10 per cent of his total income
“Obtaining income details of independent directors would be difficult as directors may not be willing to share the income information. This is so especially in the light of Data Privacy Laws,” said CII.
It pointed out that the total remuneration of non-executive directors, including independent directors, is capped by Section 197 of the Companies Act, 2013. CII said that a second cap on the remuneration of Independent Directors is not required.
“Independent directors also contribute to shareholder value creation through strategy evaluation, risk management, governance and control. Caps on remuneration may discourage him from fulfilling this role,” said CII.
In fact, it said such an approach carries the distinct risk of converting independent directors into auditors, thereby leading to conflict and dissension in Board processes.