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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Board Committees

Vihaan Retail Ltd's NRC is preparing its remuneration policy. Which approach is consistent with Section 178(4) of the Companies Act, 2013?

The NRC should link remuneration to performance with clear benchmarks and balance fixed and incentive pay for short and long-term goals. Section 178(4) also requires remuneration to be sufficient to attract and retain talent, and the policy must be disclosed on the website and in the Board's report.

  1. AFix remuneration at a level that is purely nominal to conserve funds
  2. BLink remuneration to performance with clear benchmarks and balance fixed and incentive pay across short and long-term objectivesCorrect
  3. CPay only fixed remuneration to avoid linkage to performance
  4. DKeep the policy confidential and exclude it from the Board's report

Explanation

Section 178(4) requires remuneration to be reasonable and sufficient to attract, retain and motivate, to relate clearly to performance benchmarks, and to balance fixed and incentive pay reflecting short and long-term objectives. The policy must also be placed on the website, if any, with salient features disclosed in the Board's report, which rules out confidentiality.

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