Empowering Shareholders On Executive Compensation

Recent shareholder activism and regulatory action have focused attention on the issue of executive compensation in India. The Companies Act, 2013 (act), restricts the total managerial remuneration payable by a public company to its directors and managers in a financial year to no more than 11% of its net profits for that financial year. Consistent with recent trends in shareholder empowerment and corporate governance, the Ministry of Corporate Affairs amended the act in September 2018 to permit shareholders of public companies to decide on the payment of remuneration exceeding the 11% ceiling or the limits prescribed where the company had inadequate or no profits (instead of seeking central government approval).