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Director's pay

P. M. G. Pillai, Mannar, Kerala

This refers to the news item `Company Directors pay and allowance' (Business Line, December 28).

The opinion of the task force constituted by the Company Law Board to study and report on the matter has missed out an important rider. The pay and perquisites are to be fixed at a uniform rate for all companies considering the capital invested, their tu rnover and profit earned.

In fact, the perquisites and other allowances should be based on performance only. If the board of directors have people with vision, knowledge and integrity, the company would do well; else it would mean the slow death of the organisation and loss to in vestors. If vanishing companies were to be investigated, it would be learnt that many had committed fraud and many others were attempting the same.

Thus, the criteria to be considered are the capital issued, the funds borrowed, working capital, technology used, marketing arrangements (internal and exports). Every organisation must have a monitoring unit that measures the production, marketing, cash flow expenses, gross profit and net profit.

Payments should also be based on the annual net profit and must be decided at the AGM and must be included in the agenda. No loss-making unit need pay any bonus or enhance the payments of its directors. A provision to this effect can be inserted in the a mended Act. However, if the task force only comprises senior officers, they would certainly be biased in favour of the directors. This is what has happened here. Except for basic payments, all other payments must be based on actual performances.