IB relaxes CEO salary provision

Insurance companies can offer their CEOs salaries, allowances and other facilities up to 25 times the salary of the lowest-paid employee, according to the Insurance Board’s (IB) latest directive on Corporate Governance. Earlier, the insurers had to maintain the CEO remunerations not more than 15 times the salary of the lowest paid. However, to increase the chief executive officers’ pay to the new level, the company boards have to take approval of the annual general meeting (AGM), and the hike should be justified on the ground of underwriting profit, the directive states. The CEO’s total remunerations include salary, grade, allowance, insurance facility, incentives and taxable income, according to the IB. IB chairman Fatta Bahadur KC said the new provision aims incentivising outstanding performers. “Various criteria have been put in place for hiking the CEOs’ salaries,” he said. The new provision is also applicable to insurers operating as branch of foreign companies or joint venture companies, according to the directive. However, if a parent company abroad wants to boost facilities to the CEO of its Nepal-based joint-venture or the branch chief, it has been allowed to do so. While new directive has relaxed qualification requirement, it has barred those winning the United States Diversity Visa (DV) lottery and those having Permanent Residency (PR) of foreign countries from becoming the CEOs. The new directive has also divided promoters who are attracted to conflict of interest into two categories—family members and close relatives. Earlier, both family members and close relatives were categorised as close relatives. As per the new definition, family members include husband, wife, son, daughter, adopted son, adopted daughter, step mother and brother and sister. Brother in law (wife’s brother), sister in law (husband’s younger and elder sisters), wife’s elder sister, wife’s sister’s husband and wife’s brother’s wife fall in the close relatives category. “Although daughter in law and brother in law have already been mentioned as close relatives, the directive has segregated it, keeping brother’s wife and younger sister’s husband under a separate category. “The change in family members and close relatives was made in order to bring clarity on the issue,” said KC. Source: ekantipur