Disclosures pertaining to remuneration of directors and employees - Section 197(12)

Section 197(12) read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 provides that Board's Report of every listed company shall include:-

• the ratio of the remuneration of each director to the median remuneration of the employees of the company for the financial year;
• the percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;
• the percentage increase in the median remuneration of employees in the financial year;
• the number of permanent employees on the rolls of company;
• average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration;
• affirmation that the remuneration is as per the remuneration policy of the company.
• the expression 'median' means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers may be found by arranging all the observations from lowest value to highest value and picking the middle one;
• if there is an even number of observations, the median shall be the average of the two middle values.

The Board's report shall include a statement showing the names of the top ten employees in terms of remuneration drawn and the name of every employee, who, -

• if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two lakh rupees;
• if employed for a part of the financial year, was in receipt of remuneration for any part of that year,  at a rate which, in the aggregate, was not less than eight lakh and fifty thousand rupees per month;
• if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.

The statement referred to above shall include the following as under:

• designation of the employee;
• remuneration received;
• nature of employment, whether contractual or otherwise
• qualifications and experience of the employee;
• date of commencement of employment;
• the age of such employee;
• the last employment held by such employee before joining the company;
• the percentage of equity shares held by the employee in the company within the meaning of clause (iii) of sub-rule (2) above; and
• whether any such employee is a relative of any director or manager of the company and if so, name of such director or manager:                                                         

Provided that the particulars of employees posted and working in a country outside India, not being directors or their relatives, drawing more than sixty lakh rupees per financial year or five lakh rupees per month, as the case may be, as may be decided by the Board, shall not be circulated to the members in the Board’s report, but such particulars shall be filed with the Registrar of Companies while filing the financial statements and Board’s Report.

DISCLAIMER:

The article is based on the relevant provisions and as per the information existing at the time of the preparation. In no event I shall be liable for any direct and indirect result from this article. This is only a knowledge sharing initiative.

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