Take consultants on roll or foreclose contracts, says NSE pay panel

Move follows advisor to ex-MD Chitra Ramkrishna foreclosing his own contract without citing reason

The Nomination and Remuneration Committee (NRC) of the National Stock Exchange (NSE) has asked the bourse to absorb consultants as employees based on criteria such as requirements and suitability or end their contracts at the earliest. The direction was given by the newly constituted four-member NRC in November. The move could have an impact on the contracts of the consultants currently engaged by the bourse and how it deals with the work of such nature in the future. Some contracts have been foreclosed after this, according to people in the know.

“The Nomination and Remuneration Committee of our Board was at its meeting dated November 9, 2016 advised that consultants with responsibilities be considered for absorption as employees after taking into consideration the current and future requirements, suitability, fitment, feedback, performances, age, etc or the consultancy contract be foreclosed as soon as possible,” the bourse said in its draft red herring prospectus (DRHP) filed last week. The panel is now headed by public interest director (PID) Dinesh Kanabar and included chairman Ashok Chawla, former chief Ravi Narain and TV Mohandas Pai (also PID) as its members.

The disclosure did not explain what “consultant with responsibilities” covered. The move came weeks after Anand Subramanian, the consultant and adviser to the then managing director Chitra Ramkrishna, foreclosed his own consultancy without attributing any reason.

Subramanian’s appointment as a consultant and later re-designation as group operating officer and his perceived proximity to the top management had become a subject of criticism. There were reports of anonymous letters alleging irregularities and corporate governance concerns citing his high remuneration.
According to the DRHP, the bourse’s spend on “IT management and consultancy charges” went up from Rs 3.2 crore in FY14 to Rs 9.07 crore in FY15. For FY16, the figure stood at Rs 6.82 crore while in the first half of FY17, this shrank to Rs 76 lakh.

The DRHP confirmed these anonymous letters and the Securities and Exchange Board of India (Sebi) directives based on these in September. The regulator wanted to ensure there was no conflict of interest.
“Sebi had received anonymous complaints questioning the re-designation of Anand Subramanian as the group operating officer and advisor to our managing director. Sebi, by its letter dated September 15, 2016, advised us to place the complaint letters before our board and to decide whether there has been any violation of code of conduct or principle of avoidance of conflict of interest while appointing Anand Subramanian...”

Anand Subramanian has foreclosed his consultancy assignment with effect from October 21, 2016 and Sebi has been informed of the same through our email dated December 21, 2016, the bourse said in the DRHP.

As of its last annual report, the NRC comprised Chawla, Narain and was chaired by retired supreme court judge B N Srikrishna, who was a public interest director. Srikrishna’s term ended on August 2. Elsewhere in the DRHP, the bourse talked about various board committees being reconstituted following the induction of new directors, “the Nomination and Remuneration Committee was last re-constituted by our board on November 9, 2016.”

Not getting Anand Subramanian’s appointment passed through the NRC was one of the issues raised by the exchange’s secretarial audit. In an interview to Business Standard last month, Chawla had confirmed that the matter of irregularities in the appointment was raised by the secretarial auditor of the company. “The secretarial auditor, from whatever papers were available, had raised some issues. Then presumably, there were some oral discussions between senior management and the auditor. And, to some extent they had modified the views from what they had communicated at that point of time. This was all looked at in the recent past,” Chawla had said.