INSURANCE
IRDAI to modify guidelines on remuneration of CEOs, directors of private insurers
Jan-04-2022

With a view to check excessive risk taking behavior of top executives, regulator -- Insurance Regulatory and Development Authority of India (IRDAI) has proposed to modify the guidelines on remuneration of non-executive directors, managing directors, CEOs and while-time directors of private insurance companies. As per the proposed guidelines, the remuneration of chief executive, managing directors and whole time directors will be divided between fixed pay, perquisites and variable pay. Also, the fixed pay should be reasonable and all the fixed items, including perquisites, should be treated as part of fixed pay.

As per Irdai’s exposure draft, it further proposed that the non-executive directors will be entitled to a remuneration of up to Rs 20 lakh per annum, in addition to sitting fee and other expenses. Apart from sitting fee and other expenses, it provides for payment of remuneration commensurate with an individual director’s responsibilities and demands on time, which are considered sufficient to attract qualified competent individuals, in the form of fixed remuneration. However, such remuneration shall not exceed Rs 20 lakh per annum for each such director excluding Chairman.

As regards chairman of the board, the proposed guidelines said the remuneration may be decided by the board of directors of the respective company. The non-executive director will not be eligible for employee stock ownership plans (ESOPs). Prior approval of Irdai will be needed for any allotment of sweat equity to a non-executive director. The remuneration for the whole-time directors, chief executive and managing directors will be divided between fixed pay, perquisites and variable pay. The draft guidelines said ‘Fixed Pay should be reasonable and all the fixed items, including perquisites, shall be treated as part of fixed pay’. The guidelines also stipulate the norms for computation of variable pay. It added the deferred remuneration should be subject to malus/clawback arrangement in case of any negative trend in the performance of the insurer.

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