Havells Defends Directors' Pay Against Proxy Firm's Critique

Havells India has recently addressed concerns raised by Institutional Investor Advisory Services (IiAS) regarding the remuneration proposed for two of its directors. IiAS had urged shareholders to vote against the reappointment of Ameet Kumar Gupta as a whole-time director and Rajesh Kumar Gupta as group CFO, citing the remuneration as excessively high given the company's size and complexity. Ameet Kumar Gupta's remuneration for FY24 stood at Rs 12.2 crore, with an estimated increase to Rs 17.64 crore for FY25. Similarly, Rajesh Kumar Gupta received Rs 27.33 crore in FY24, with his FY25 remuneration estimated at Rs 35.39 crore.

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In response, Havells India defended the proposed pay packages in a regulatory filing, highlighting Ameet Kumar Gupta's extensive experience and contribution to the company's growth over two decades. His FY24 remuneration represents only 0.7% of the net profits, including variable pay commission, which Havells argues is in line with the business's size and nature. The company also emphasized that this figure falls well within the 5% limit prescribed by section 197 of the Companies Act, 2013.

Rajesh Kumar Gupta, described as an independent professional unrelated to any promoters, has a remuneration package for FY24 that includes benefits under the Employee Stock Purchase Scheme (ESPS), amounting to 1.6% of net profits. This too is within the legal limit of 5% set by section 197 of the Companies Act, 2013. Havells further noted that the overall executive remuneration is 4.1% of net profit, below the 10% cap under the same act.

IiAS had expressed concerns over the lack of an absolute cap on remunerations for both directors, suggesting that as profitability increases, so could their pay, potentially to excessive levels. It also highlighted that total promoter remuneration rose from Rs 36.92 crore in FY23 to Rs 42.73 crore in FY24, and total executive remuneration increased from Rs 64.46 crore to Rs 70.06 crore over the same period.

Despite these concerns, Havells India maintains that its compensation policies are fair and justified given the directors' roles and contributions to the company's success. Ameet Kumar Gupta has served on Havells' board since March 21, 1992, and will reach the age of 70 on June 17, 2027. IiAS has stated that age should not be considered a criterion for board directorships.

This debate highlights the ongoing discussions around executive compensation in relation to company performance and governance standards. As shareholders weigh in on these resolutions, Havells India's justifications offer insight into how companies evaluate and defend their compensation strategies amidst scrutiny from advisory firms and investors alike.