Arundhati Bhattacharya's 'windfall' gain
It could be a windfall gain for Arundhati Bhattacharya, the former chairperson of the State Bank of India, who is set to join the Board of Reliance Industries.
Reliance Industries is one of the few companies which offer high commissions to its independent directors. In 2017-18, non-executive directors of the company earned at minimum Rs 1.59 crore in remunerations (including sitting fee and commissions) for a full year of directorship.
Arundhati Bhattacharya, who retired as chairperson of SBI, the country's largest bank, on 6 October 2017, is also likely to draw similar kind of salaries as she joins the RIL board.
This would be a massive jump from her Rs 28.96 lakh full-year salary at SBI in 2016-17. In 2017-18 till 6 October 2017, she drew a salary of Rs 14.7 lakh. Even if RIL continues to pay same kind of salary to its non-executive directors, Arundhati Bhattacharya may see her take home jump by 5 times more than what she was earning every year as SBI Chairperson.
This jump in salary is possible even if she joins only the board of Reliance. By law she can be on the board of seven listed companies as an independent director.
Already there are reports that she may join the Piramal Enterprises and ChrysCapital.
OP Bhatt, the former SBI chairperson, received Rs 3.92 crore as commission and sitting fee for being on the board of three Tata group companies - TCS (Rs 2.05 crore), Tata Steel (Rs 1.8 crore) and Tata Motors (Rs 7.2 lakh) - in 2017-18.
Independent directors' remuneration has always been an issue of debate among advocates of corporate governance. Some people say such high commissions can dilute the independence of independent directors.
The independent directors, based on their experience, expertise and network, are paid in two ways -- sitting fees and commission. The sitting fee can be up to Rs 1 lakh for every board meeting or committee meeting attended.
While sitting fees are nominal sums, it is the commission, which some companies pay to the independent directors that can influence their functioning on the board.
A committee formed by the Ministry of Corporate Affairs, has recommended a cap on independent director's remuneration, to ensure 'independence' of such directors on the board of a company.
The committee, which was formed to review penal provisions of Company Act 2013, has recommended imposition of a cap on independent director's remuneration, in terms of percentage of income, in order to prevent any material pecuniary relationship, which could impair his independence on the board of the company.