Independent directors of Tata Chemicals, TCS get double-digit hikes

S P Thorat, an independent director of Tata Chemicals, received a 26.3% increase in 2016-17

The independent directors of Tata Chemicals and Tata Consultancy Services (TCS), which witnessed a boardroom battle last year after its former chairman Cyrus Mistry’s ouster, received a good increase in compensation for the fiscal year ended March 31.

Statistics collated from the annual reports of the two companies show Y S P Thorat, an independent director of Tata Chemicals, received a 26.3 per cent increase in 2016-17, while Nasser Munjee received a 20.7 per cent hike. Vibha Paul Rishi, who is also an independent director on the board of Tata Teleservices, received a 17.8 per cent hike.

In TCS, former State Bank of India chairman, O P Bhatt, received a 20.1 per cent hike for the 2016-17, followed by Aman Mehta, who got a 15.3 per cent hike. Ron Summer and V Thayagarajan received an average of 12 per cent hike each (see chart). Bhatt was appointed interim chairman after Mistry resigned last year. 

The annual report of Tata Chemicals said that the company also paid 16 per cent higher compensation to R Mukundan, its managing director and chief executive, for the year. The average hike in salary for the rest of the employees was 8.6 per cent, while managers received a hike of 15.4 per cent, the report said.

The increased compensation was paid to the independent directors when Tata Chemicals reported a 16 per cent drop in its sales at Rs 10,718 crore and a 22.7 per cent rise in net profit at Rs 1,234 crore in FY17, as compared to the previous year. 

In case of TCS, for FY17, as per IFRS-based consolidated financial statement, the company's revenue and net profit increased by 8.6 per cent each over the year ago period to Rs 117,966 crore and Rs 26,289 crore, respectively. 

Under Section 197 (5) of the Companies Act, 2013, a director is entitled to receive a remuneration of Rs 1 lakh and, if the company makes money, a commission to the extent of 1 per cent of the net profit of a company.

The role of independent directors came into sharp focus in the battle between the Tatas and Mistry. While Nusli Wadia,  former independent director of Tata Chemicals, and Deepak Parekh, an independent director in Indian Hotels, backed Mistry, others preferred to back the Tatas. In December, while Mistry resigned, Wadia was voted out by the shareholders in an extraordinary general meeting (EGM).

The report said since Wadia ceased to be a director of the board, following a resolution passed by the members at the EGM held on December 23, the board of directors decided not to pay him any commission for FY17. Wadia and Mistry were paid sitting fees for attending the board meetings during the year. 

Wadia later filed a complaint with the market regulator Securities and Exchange Board of India on his ouster from Tata Chemicals, Tata Motors and Tata Steel boards, saying the promoters should not be allowed to vote on the special resolution to remove an independent director as it hampers their independence. 

Besides, Wadia said as many directors are drawing remuneration from other Tata group companies, they cannot be appointed as independent directors.