A proposal by InterGlobe
Enterprises, the Gurugram-based parent of IndiGo
airline, for travel benefits to the two independent directors
(IDs) on its board and their family has caught the eye of a proxy advisory firm.
The Stakeholders' Empowerment Services (SES) has objected to the plan and asked shareholders to vote against the move in a postal ballot that is currently open and is slated to close on Tuesday. The company is seeking shareholders' approval for unlimited free tickets, for leisure purposes, to the two IDs- Devadas Mallya Mangalore and Anupam Khanna-- and their family members (spouse and dependent children) in the ballot.
contends Section 197(7) of the Companies
Act does not allow any such payment to IDs. Further, this proposal has been referred by the Nominations and Remuneration Committee (NRC) and the Audit Committee
-- both panels comprise three directors, including Mangalore and Khanna.
"Did these directors participate in recommending the proposal? If yes, it raises a question over their independence, the company's intentions in providing such perquisites and the oversight mechanism of the board. If they did not participate, it would, then, amount to a single member of the committee mooting the proposal, unless some other person whose identity is not disclosed initiated it," the SES
said in its report.
Of InterGlobe's six directors, one is an executive director, designated President and whole-time director. Of the other five, three are non-executive promoter directors and two are independent non-executive directors. Approvals for the facility to the promoter directors were taken before its initial public offer (IPO) of equity.
In its response, the company said it clearly stated in the proposed resolution that it was seeking approval from its members for extending the travel benefits to the IDs. "The company has not sought any general approval from the members for extending any benefit to its directors (present or future). We have taken specific approval for the two independent directors
within the parameters of present laws."
The proposed benefit for the IDs, it adds, "is in line with the prevailing globally-accepted aviation industry norms to provide similar benefits to directors and officers beyond a certain level. Further, the travel benefits are available to the IDs, including their spouses and dependent children below 21 years of age at the time of travel. However, if we consider the facts, the IDs have no children below 21 years of age and, hence, the ambit of benefit covers only IDs and their spouses."
SpiceJet and Jet Airways, the other listed private airlines, have not come up with such resolutions, notes the SES.
Referring to the word "may" in the said Section 197 of the Act, the company argues the remuneration payable to IDs includes sitting fee and reimbursements but is not limited to these. "The word used here is "may" and not 'shall', which means the intention of law is not to prohibit extending any other benefit to an ID, subject to obtaining requisite approvals," said InterGlobe.
It adds the actual remuneration to the IDs could not be clearly articulated since this was dependent on the number of travels availed of by the two and their spouses. However, the value of the benefit per travel would be limited to the difference between the cost of the ticket at the time of booking and amount of airport charges and other levies, it said.
further adds that the proposal to extend travel benefits to the IDs was placed by the management before the NRC
and Audit Committee.
"The (panels) had refrained from making any recommendation to the Board." It argued that since there was no recommendation from these committees, there was neither a violation of the code of conduct and nor any conflict of interest.