Govt panel to study executive pay at loss-making companies
New Delhi: The government has set up a panel to look into the remuneration practices of top managements at loss-making companies amid concerns over fat pay packages being doled out to senior executives.
"The committee, set up by the Corporate Affairs Ministry, would primarily focus on executive pay practices at loss- making companies. It would also study the prevailing remuneration trends at other firms," a senior official said.
Some specific cases have recently come to light, where loss-making firms in sectors like aviation and infrastructure space have given sizeable pay hikes to their CEOs and other senior executives.
While rules are already in place for top management pay restrictions at loss-making companies, the Ministry would use the panel's recommendations to better understand the existing trends and take the necessary actions.
The loss-making companies currently need the government's approval for paying remuneration to their top-management executives, subject to certain ceilings and conditions.
In recent times, concerns have been raised about corporate governance issues over exorbitant pay packages of top executives, such as CEOs and executive directors.
Generally, compensation of senior executives are linked to the overall performance of the company.
However, there have been instances where entities, despite making losses, have given handsome pay packets to the top management personnel.
The panel has been set up at a time when the government is looking at various ways to boost the overall corporate governance level in the country.
A panel, set up by the Ministry and chaired by eminent industrialist Adi Godrej, recently suggested various steps to improve the overall corporate governance culture.
The committee has recommended adoption of 17 guiding principles to underpin the system of corporate governance. These cover various aspects such as the responsibilities of independent directors and the functioning of a company's board.