Want to share with your friends too?

Business
07 Aug 2016

IRDA issues remuneration guidelines; caps CEO's salary at Rs.1.5 cr

Remuneration guidelines for insurance company chiefs

In a first, the Insurance Regulatory and Development Authority (IRDA) of India issued remuneration guidelines for non-executive and managing directors at insurance companies.

IRDA capped the annual remuneration of an insurance company's Chief Executive at Rs.1.5 crore that could be remunerated from policyholders' fund.

The guidelines also state remuneration shall not be revised until the expiry of a year from the earlier date.

In context

Remuneration guidelines for insurance company chiefs

Introduction

About the IRDA of India

The Insurance Regulatory and Development Authority (IRDA) of India regulates as well as develops the insurance sector in the country.

It is an autonomous body that was constituted under a Parliament of India Act - Insurance Regulatory and Development Authority Act, 1999, passed by the Indian Government.

The apex statutory body's headquarters were located in Delhi till 2001, after which it shifted to Hyderabad.

Mission of the IRDA

According to the Insurance Regulatory and Development Authority (IRDA) Act, 1999, the Mission of IRDA is: "To protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto."

07 Aug 2016

IRDA issues remuneration guidelines; caps CEO's salary at Rs.1.5 cr

In a first, the Insurance Regulatory and Development Authority (IRDA) of India issued remuneration guidelines for non-executive and managing directors at insurance companies.

IRDA capped the annual remuneration of an insurance company's Chief Executive at Rs.1.5 crore that could be remunerated from policyholders' fund.

The guidelines also state remuneration shall not be revised until the expiry of a year from the earlier date.

Love Business news?

Stay updated with the latest happenings.

Notify Me

Excess shall be borne by shareholders' account

The IRDA stated, "In case the annual remuneration 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."

Investors and promoters not permitted to pay remuneration

Investors, Promoters

Investors and promoters not permitted to pay remuneration

IRDA's guidelines do not permit investors, investors' companies, promoters, or promoters' companies to pay remuneration to top executives of the insurance companies.

The insurance regulator noted the necessity to bring professionalism to the insurance company boards can't be overemphasized.

Remuneration structures like fixed pay, bonus, perquisites, guaranteed pay, stock, severance package, gratuity, and pension plan, etc. are also covered under the issued guidelines.

Appropriate compensation

IRDA said: "In order to enable Insurers to attract and retain professional directors it is essential that such directors are appropriately compensated. Accordingly, the Authority has finalized the guidelines on remuneration for non-executive Directors, as under for implementation by the private sector insurers."

Comprehensive Policy

Insurers should formulate and adopt a comprehensive remuneration policy

The IRDA said the Board of Directors of insurers should devise and adopt a comprehensive non-executive Directors' remuneration policy by consulting its Nomination and Remuneration Committee.

While devising the policy, insurer's Board shall ensure that it complies with the Companies Act 2013's provisions.

Employee stock ownership plan isn't included in the total remuneration, but its details shall be disclosed as required for financial statements.

All forms of compensation should be consistent with risk alignment

Risk Alignment

All forms of compensation should be consistent with risk alignment

IRDA said if the insurer issued its shares as sweat equity, then they would be governed by SEBI's provisions of sweat equity regulations.

The company should ensure payouts are adjusted "for all types of risks"; all forms of compensation should be consistent with risk alignment.

The regulator said compensation outcomes are identical to results of a risk and also sensitive to its time horizon.

Ask NewsBytes
User Image

Next Timeline