Remuneration paid to administration is frequently a point of controversy between shareholders and management because shareholders don’t get to see the company’s performance until the financial statements are presented to them at the annual general meeting, and it is at that meeting that they are supposed to review and approve the remuneration to be paid to managing directors or managers.

Additionally, remuneration is an above-the-line item in the profit and loss account, limiting the potential profits for distribution to shareholders. As a result, they aim to ensure that managerial people are compensated appropriately and by their performance.

WHICH COMPANIES ARE REQUIRED TO FORM A NOMINATION REMUNERATION COMMITTEE ?

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The Provision [Sec-178] of the Companies Act,2013 demonstrates the Nomination Remuneration Committee. The following categories of companies are required to form a Nomination Remuneration Committee of the Board:

Listed organizations;
All public organizations acquiring a paid-up capital of ten crore rupees or more;
All public organizations possessing a turnover of one hundred crore rupees or more;
All public organizations, developing in aggregate, outstanding loans or borrowings or debentures or deposits exceeding fifty crore rupees or more.

SCOPE OF THE COMMITTEE:

To know the individuals who are competent to become Directors and who may be nominated in senior management according to the conditions established and propose their appointment and removal to the Board.

To provide the criteria for identifying a director’s qualifications, positive characteristics, and integrity.

To review and recommend the remuneration of the Managing Director and other Whole-time/Executive Directors, subject to Shareholder approval.

To propose a policy recommendation to the Board regarding remuneration for Directors, Key Management Personnel, and other staff. Such remuneration policy shall be published in the Company’s Annual Report.

FORMATION OF THE NOMINATION REMUNERATION COMMITTEE :

CHAIRMAN:

The Chairman of the aforementioned Committee must be an Independent Director. If the Chairman of the Committee is unable to attend a committee meeting, the current members may designate another Independent Director to serve as Chairman for that meeting. In the event of an equality of votes, the Chairman shall not have a deciding vote on any topic. The topic will be brought before the board for approval in this situation.

MEMBERS:

The Committee will be comprised of at least three members nominated by the Board. The Committee’s members must be Non-Executive Directors, with at least one-half of them being Independent Directors.

QUORUM

There should be a minimum of two independent members in the quorum of meetings of the Committee.

DUTIES, RIGHTS & RESPONSIBILITIES:

The Committee is authorized to conduct the following reviews:

a. Salary, privileges, pension plans, a retirement package, detachment compensation, and the structure of the remuneration package, including the proportion of fixed and variable components, annual/mid-term increments, merit rewards, special payments, and so on, of the Managing / Executive Director and Key Managerial Personnel.

b. Modifications to the salary package, appointment terms, notice period, termination fees, and recruitment, retention, and termination policies and processes:

To suggest to the Board, the shortlisted individuals who are qualified in becoming directors and may be appointed in senior management, as well as their appointment and/or dismissal.
When necessary, the Committee may seek outside lawyers or another independent professional opinion on problems relating to salary, incentives, and other industry practices.
The Committee has the authority to obtain any information it requires about every employee, and management has been told to comply with any request made by the Committee.
The Committee shall consider if any, succession policies for both executive and non-executive Directors.
The Committee’s Chairman may be available at the Annual General Meeting to address shareholders’ questions.

FAQs

1.

What is a Nomination and remuneration committee?

(3) The Nomination and Remuneration Committee shall formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration for the directors, key managerial personnel and other employees.

2.

What is the function of a remuneration committee?

It is also responsible for determining specific remuneration packages for executive directors and senior management, including compensation payments and benefits in kind. It should also make recommendations to the board of directors for the remuneration of non-executive directors as well.

3.How many directors are there in Nomination and remuneration committee?

The Company’s Board has constituted a Nomination and Remuneration Committee (the “Committee”) consisting of three or more non-executive directors out of which not less than one-half are independent directors and the Chairman of the said Committee is an independent director.

4.Who can be member of Nomination and remuneration committee?

The Committee will be appointed by the Board and will serve at its discretion. The Committee shall consist of no fewer than three directors, all of whom shall be non-executive directors and at least two-thirds of whom shall be independent directors.

5.What is the purpose of nomination?

In parliamentary procedure, a nomination is basically a motion to fill a blank in a motion “that _____ be elected.” Nominations are used to provide choices of candidates for election to office. After nominations have been made, the assembly proceeds to its method of voting used for electing officers.

6.Who appoints the remuneration committee?

the Board

The Committee shall be appointed by the Board on the recommendation of the Nomination and Governance Committee and shall comprise not less than three non- executive directors of the Company, all of whom shall be independent.

7.What are the three types of remuneration?

Salary, which is defined as a set sum of pay for a period of one year. Hourly, which is defined by a currency amount that’s paid per hour of work. Commission, which is a payment method that’s based on the work performance of the employee.

8.How many types of remuneration are there?

What are the types of remuneration? Based on the job type, employee capabilities, and company model, remuneration can be direct (fixed) or indirect (variable). Fixed recompense includes wages, salary, bonuses, incentives, commissions, etc.

Harshit Jain

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