The compensation packages for independent directors at India’s leading blue-chip companies have seen a significant surge over the past five years, more than doubling during this period, according to a report by The Economic Times. This rise reflects the growing responsibilities, time investments, and efforts demanded of them.
According to an analysis by Exec-Rem Advisors, a specialised executive compensation advisory firm, the median compensation for independent directors at Nifty-50 companies increased by 106 per cent, reaching Rs 87.4 lakh in FY24, up from Rs 42.3 lakh in FY19, the report said. Notably, the last fiscal alone saw a 25 per cent increase in their pay.
Citing industry experts, the business-daily said that this upward trend can be attributed to companies seeking to ensure that independent directors can dedicate adequate time and focus to their increasingly complex and challenging roles. These directors are now required to navigate unforeseen challenges, provide oversight on critical issues, address stricter regulatory demands, maintain continuity, and foster inclusivity and innovation.
Between FY19 and FY24, the median compensation for independent directors at 37 of the Nifty-50 companies (excluding public sector enterprises, banks, and insurance firms whose pay scales are regulated by the RBI and IRDAI, respectively) grew at a compound annual growth rate (CAGR) of approximately 16 per cent, according to the Exec-Rem’s study.
For those in the 75th percentile, independent directors earned an average of Rs 1.11 crore in FY24, marking a 54 per cent rise from Rs 71.98 lakh in FY19. On the lower end, directors in the 25th percentile saw their earnings climb to an average of Rs 48.8 lakh, a substantial 162 per cent increase from Rs 18.6 lakh in FY19.
The median commission paid to independent directors at Nifty-50 companies grew from Rs 33.6 lakh in FY19 to Rs 74.10 lakh in FY24, translating to a CAGR of approximately 17 per cent. In the last fiscal year alone, this commission jumped by 34 per cent, from Rs 55.2 lakh in FY23, the report noted.
In India, independent directors’ sitting fees per meeting are capped at Rs 1 lakh, and they are prohibited from receiving equity compensation. As a result, increasing the commission is the only viable option for significantly enhancing their overall pay, The Economic Times said, citing Anubhav Gupta, managing director of Exec-Rem Advisors.
The median sitting fees for attending board and committee meetings at Nifty-50 companies increased at a CAGR of 11 per cent between FY19 and FY24.
Anubhav Gupta mentioned that the role of an independent director has become increasingly demanding, requiring a substantial time commitment for board meetings, committee work, and keeping up to date with industry trends and company-specific issues.
First Published: Aug 12 2024 | 5:13 PM IST
