Insurance regulator IRDAI today put a cap of Rs 1.5 crore on the annual salary of Chief Executive, which could be paid from the policyholders’ fund.
“In case the annual renumeration of the MD/CEO/Whole Time Directors exceeds Rs 1.50 crore (excluding perquisites plus bonuses etc, by whatsoever names) such excess shall be borne by shareholders’ account,” IRDAI said in the guidelines on Remuneration of Non-executive Directors and Managing Director.
No revision in renumeration shall be permitted till the expiry of one year from the date of earlier approval, it said.
“No renumeration shall be paid to MD/CEO/WTDs by any of the promoter or investors or by the group companies of the promoters’ or investors’ companies,” it said.
It noted that the need to bring in professionalism to the boards of insurers cannot be overemphasised.
“In order to enable Insurers to attract and retain professional directors it is essential that such directors are appropriately compensated. Accordingly, the Authority has finalised the guidelines on remuneration for non-executive Directors, as under for implementation by the private sector insurers,” it said.
The Board of Directors, in consultation with its Nomination and Remuneration Committee, should formulate and adopt a comprehensive remuneration policy for the non-executive Directors, it said.
While formulating the Policy, the Board shall ensure compliance with the provisions of the Companies Act, 2013, it added.
As per the norms ESOP is kept outside the computation of the total remuneration but the extent of ESOP should be reasonable.
The details of ESOP granted should also be disclosed in terms of the disclosure requirements stipulated for the financial statements of the insurers, it said.
In case the shares of the insurance company are issued as sweat equity, it said, then the same will be governed by the provisions of the sweat equity regulations issued by SEBI.
Noting that payouts should be adjusted for all types of risks, IRDAI said that compensation outcomes are symmetric with risk outcomes as well as “sensitive to the time horizon of the risk”.
“The mix of cash, equity and other forms of compensation must be consistent with risk alignment,” it said.
At present, there is no laid down guidelines for insurers on remuneration paid to top level management.