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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Stakeholders Rights

Zenith Motors Ltd's NRC is framing its remuneration policy for directors, key managerial personnel and senior management. Which proposal is consistent with section 178(4) of the Companies Act, 2013?

The consistent proposal is a balance of fixed and incentive pay reflecting short and long-term performance objectives. Section 178(4) requires the NRC to ensure reasonable remuneration, a clear link to performance benchmarks, and this fixed-incentive balance for directors, key managerial personnel and senior management.

  1. APay entirely fixed salary so that it is predictable and independent of results
  2. BPay mostly short-term bonus linked only to the current year's profit
  3. CA balance of fixed and incentive pay reflecting short and long-term performance objectivesCorrect
  4. DPay set equally for all so that no link to performance exists

Explanation

Section 178(4)(c) requires remuneration to involve a balance between fixed and incentive pay reflecting short and long-term performance objectives. Fixed-only or purely short-term pay ignores this, and clause (b) requires a clear link between remuneration and performance.

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