L&T Finance's proposed compensation for its directors criticised by IIAS

MUMBAI: L&T Finance's proposed compensation for its directors has been criticised by a proxy advisory firm, which has asked shareholders to vote against the plan in the upcoming shareholder meet.

Institutional Investor Advisory Services (IIAS), a firm that advises institutional investors on voting strategies and corporate governance, sent a notice on Wednesday to shareholders asking them to vote against the proposed package for YM Deosthalee, chairman and managing director, and other directors.

This is the first time that executive compensation has come under the scanner in India and IIAS' note compares the package of L&T Finance directors with peers.

"We have raised concerns on the remuneration proposed, for both directors (amounting to 2.8% of FY12 PAT), as these are not in line with peer set average and company size," IIAS said.

In a note recommending its clients to vote against certain resolutions concerning the compensation to YM Deosthalee, chairman and managing director, his colleague N Sivaraman, president and whole-time director, as well as commissions to independent directors on the board, IIAS said.

ET tried to reach Deosthalee but he was not available for comment. However, the company's spokesperson said the pay to senior executives in L&T Finance was in line with its peers and done to attract the best talent in the industry.

Further, the firm argued that executive pay was determined by a compensation committee headed by Shailesh Haribhakti, an independent member on the board.

The company has also proposed paying commissions of up to 1% of its net profits to non-executive directors. "We feel that non-executive directors should be paid a fixed amount as commissions and this should not be linked to the profits of the company," IIAS said.

IIAS has compared the proposed remuneration of YM Deosthalee with those of his peers, and benchmarking them against key financial parameters. "We find that the proposed remuneration of 7.33 crore for Deosthalee is disproportionately high even in comparison to the closest peer with similar profit after tax and total income as L&T Finance, and to the peer set average of 2.4 crore.

Deosthalee, widely regarded as one of the finest finance professionals in the industry, is known to be an austere person who has often used his wealth to fund social projects.