Farm equipment major Escorts paid G B Mathur, its non-executive director, who has also been hired as a CSR consultant a sum of Rs 2.5 crore, where as it spent less than half of this sum Rs 1.16 crore on CSR. The structure has been devised to circumvent a company law provision that caps managerial remuneration, a proxy firm has alleged.
Mathur has been associated with the company in various senior positions since 1998. He has had a long association with the company. Escorts has stated: "He is part of all the major restructuring and other important corporate decisions taken by the Company from time to time." Post his retirement Mathur was appointed as a non-executive director on the board of the Company w.e.f. 16th January, 2015. Prior to being appointed as a director, he was designated as executive vice-president (key managerial personnel) of the company.
In the last annual general meeting (AGM) held in September, 2015, the company obtained approval for payment of a professional fee of Rs 2.50 crore to him as a CSR consultant. In the ensuing AGM, the company is again seeking shareholders' approval for payment of Rs 1 crore as a professional fee to Mathur. Proxy firm Stakeholders Empowerment Services has found this excessive and asked shareholders to vote against the proposal. It suspected that the excessive professional fee was a way of circumventing companies act provisions capping managerial remuneration. Against the cap (10% of net profits) of Rs 11.859 crore, the company's managerial pay, which did not include Mathur's fee, stood at Rs 11.844 crore.
"Probably the structuring and his appointment as a NED is to avoid breaching ceiling of managerial remuneration and consequential need to seek approval from shareholders and government. Also, the proposed resolution has failed to define the purpose of the payment of professional fees as there is a lack of clarity on the ambit and what will be included in special assignments to be rendered by G B Mathur," SES said.
In response to an email seeking comments, Ajay Sharma, group general counsel & company secretary, Escorts said that the professional fee to Mathur has been proposed in line with his experience and expertise. "Escorts Limited is leveraging its ability to engineer technology to chart a growth path that spans a wider canvas of economic activity across the agriculture, infrastructure and transportation sector and to give effect to the same has embarked upon critical restructuring which have periodically been reported to the stock exchanges. With this backdrop, the professional acumen of Mathur to strategically structure the transactions in line with the business requirements enables us to create a strong differentiation in a competitive industry."
Sharma added: "Considering the company's initiatives at optimising cost, the board of directors have already recommended a cost effective professional fee payment structure for the services rendered by Mathur and the same shall be reflected in the financials of 2016-17."
The company also referred to Mathur's qualifications as a member of the Institute of Company Secretaries of India and a law graduate with over 3 decades of rich experience of handling strategic assignments. "The Board of Directors of the Company are of the view that he possesses the requisite professional qualifications and skills to render services as a Director - Skill Development and Special Assignments. Accordingly on the basis of the recommendation of the Nomination & Remuneration Committee, audit committee and the board of directors, the proposal for payment of professional fees to Mathur has been recommended for approval of the shareholders," Escorts said.