After Tata Motors, the Bajaj Group has come under the scrutiny of proxy advisory services firm Stakeholders Empowerment Services (SES) which has raised governance issues at Bajaj Auto and Bajaj Finance.
The governance issues pertain to 10 times ‘extra’ payment to independent director (ID) Nanoo Pamnani as compared to other IDs. Mr. Pamnani is on the board of all four Bajaj Group companies for long.
“In Bajaj Finance he is paid Rs.75 lakh extra (total of Rs.85.50 lakh) whereas other directors are paid in the Rs.4-8 lakh range. He is the only ID who is paid commission. No other IDs are paid commission,” JN Gupta, Founder and Managing Director, SES, said.
“In Bajaj Auto, he is the only one getting additional commission of Rs.15 lakh, while the amount may not be material keeping in view the size of the company but it is a big governance issue especially due to explanation offered in annual report,” Mr. Gupta, formerly Securities and Exchange Board of India (SEBI) Executive Director, said.
“What can be extra job given to an ID outside board? Can he do other jobs? Can he do executive function while remaining as Independent Director?” SES asked saying that any extra payment is in violation of the Companies Act.
“SES is of the view that any job performed outside his board duties and compensated as remuneration for being a director is a payment in disguise and will amount to pecuniary relationship regardless of amount and will cause him to lose his independence,” SES said.
“SES is of the opinion that any extra payment to any independent director beyond what is payable to other IDs is an unfair remuneration practice,” it added. Responding to these charges, the Bajaj Group companies have justified their stance.
“Nanoo Pamnani was requested by the company management to render certain extra services during the year ... the company was desirous of having (his) guidance. It is upto the board to decide on the commission payable to the non-executive directors within the powers given by the shareholders. Since there were justifiable reasons for doing so, Mr. Pamnani was paid the additional amount of commission,” Kevin D’sa, President (Finance), Bajaj Auto, said.
“Mr. Pamnani is the Vice Chairman and Executive Board Member. As Vice Chairman, his responsibilities supersede those of independent directors. He was requested by the company management to render certain extra services during the year. In addition to his salary in the capacity of Vice Chairman, it is up to the board to decide on the commission payable to the executive board members …,” Deepak Reddy, Chief-Human Resources, Bajaj Finance, said adding there were justifiable reasons for paying an additional amount to Mr. Pamnani.
