IiAS Recommends Vote Against New Pay Structure for Asian Paints' Amit Syngle

The Institutional Investors Advisory Services has recommended voting against the reappointment and remuneration of Asian Paints Ltd.'s Chief Executive and Managing Director Amit Syngle at the company's upcoming annual general meeting, citing the newly proposed pay structure.

In a May 10 notice, Asian Paints had listed the resolution to reappoint Syngle as managing director and chief executive for five years from April 2023 and fix his remuneration. Shareholders will vote on it virtually between June 25 and June 28.

The issue stems from a resolution at last year's AGM, where Syngle's proposed pay package had faced some resistance from institutional shareholders.

Asian Paints has sought to modify Syngle’s pay structure by including stock options worth up to 0.75% of the net profit in the given fiscal, provided the value of the stock options do not exceed 35% of the total remuneration payable to Syngle. The resolution was passed with an 82.8% overall majority.

However, about 56% of the institutional votes were cast against the proposal as they saw the stock options, now, forming 50% of Syngle’s variable pay component as the options were ‘in-the-money’ from the date of grant itself, IiAS said. The proxy advisory said these concerns do not seem to have been addressed yet.

"The company must cap remuneration in absolute terms and disclose the estimated quantum of stock options to be granted over tenure," the IiAS said, as it does not support granting stock options to directors at over 20% discount to market price, unless the vesting is exclusive based on performance-linked conditions.

In a detailed response to BQ Prime's queries, Asian Paints said Syngle's variable pay will not exceed 0.5% of the consolidated profit of the company.

It said that IiAS is comparing the basic salary of Syngle in FY21 with the proposed pay for FY24 onwards, that is three years ahead. "This is not a like-to-like comparison considering it includes year-on-year growth based on performance."

Asian Paints added that the stock options proposed to be granted are also subject to certain vesting conditions that include achieving performance targets and service conditions. "The stock options are not fixed as such."

The ESOP component is carved out from the existing commission pay out to the MD & CEO, and the 50% discount to the market price "encourages the “pay-at-risk” for the Eligible Employees", it said.

"The endeavour is to establish a healthy balance between the fixed and variable pay which would be in line with the industry practise and motivate the employee to align their focus with the Company’s goals and performance," Asian Paints said.

"Both ISS and SES governance, proxy advisory firms, have voted in favour of the resolution seeking reappointment of Mr. Amit Syngle," it said.

Reliance Power: Auditor Concerns

Separately, the IiAS has also recommended voting against the adoption of Reliance Power Ltd.'s financial statements for the year ended March 2022 as auditors have raised concerns about the continuity of the company.

It said that auditors have qualified their opinion on the consolidated financials of the company. They raised concerns over the non-provision of interest of Rs 3,600 crore on the borrowings of its subsidiary Vidarbha Industries Power Ltd.

The wholly owned subsidiary of Reliance Power has incurred losses during FY22 and its current liabilities exceed current assets, while its plant has been out of operations since 2019, IiAS noted. One of its lenders has also filed an application under the Insolvency and Bankruptcy Code.

IiAS said the auditors have also raised concern over the company's ability to continue as a going concern being dependent on events like loan restructuring, asset monetisation and realisation of regulatory and arbitration claims.