Real estate major DLF is asking its shareholders permission to set up a special pension scheme for its directors. The company said that while it is allowed to set up pension schemes for its employees in general, it wants to set up a specific limited pension scheme targeted at its directors who are retiring.
Key points: the entire scheme will be drawn up by the board at its sole discretion. It is meant to reward loyal directors. The scheme is at the discretion of the board, withing the broad framework approved in the shareholder resolution.
The text of the explanation that accompanies the resolution says: “Your Board of Directors have now proposed to introduce a specific and limited pension scheme aimed at extending retirement benefits of any kind and in any manner from the funds of the Company to directors who, in the sole opinion of the Board of Directors, during their employment and association with the Company, have performed exceptionally and have made extra-ordinary and outstanding contribution or rendered exemplary services for the development, growth and success of the Company.”
Key points: The resolution does specify some broad parameters. The board will prescribe some basic criteria but will have to include one rule that the person should have been with the company for 20 continuous years and with a good track record. The pension drawn will be pegged to the last drawn remuneration but will also have to be in line what is being paid to similar serving directors. Other conditions can be specified by the board while formulating the scheme.
The text says: “…to formulate the said scheme in line with the specific fundamental parameters for determining eligibility for retirement benefits i.e. (i) the basic thresholds / qualifications for a retired director to be considered eligible for the retirement benefits, which must include a minimum tenure requirement of over 20 years of continuous and unblemished serving on the Company’s Board of Directors; (ii) limits/quantum of retirement benefits proposed to be made available to the identified and selected director provided the same commensurate with the last drawn / eligible emoluments and in no event, exceed the total remuneration and revisions paid / available to the senior managerial personnel having similar stature as the relevant director; and (iii) such other condition(s) as the Board may deem appropriate in the best interest of the Company.”
What could have prompted this resolution at this stage? Maybe, it is just an enabling resolution that gives the company powers to draw up a specific scheme, perhaps as some other companies may already have. But also remember that the DLF board is made up of quite a few senior directors. If the company is planning some sort of succession plan or intends to infuse new faces in the board, which may become clear in the near future, then such a scheme may help in a reshuffle. Directors may take more kindly to retirement, if they can see that their financial benefit from the company is held at the same level, as when they were on the board.
Here is a list of the directors on DLF’s board. It is based on a list of directors and ages as available, as of the date of writing this article, on the Reuters website here (link), dates of appointment from DLF’s various annual reports available here (link), and DLF’s red herring prospectus.
Name, Age, Designation, Date of appointment
- KP Singh, 80, Executive chairman, 14.11.1963
- Rajiv Singh, 54, Executive vice-chairman, 16.11.1998
- Pia Singh, 42, Whole-time director, 18.02.2003
- GS Talwar, 65, Non-independent non-executive director, 21.04.2006
- TC Goyal, 68, Managing director, 01.03.1998
- Brijendra Bhushan, 80, Independent non-executive director, 16.11.1988
- Dharam Kapur, 84, Independent non-executive director, 21.4.2006
- KN Memani, 74, Independent non-executive director, 21.4.2006
- MM Sabharwal, 90, Independent non-executive director, 21.4.2006
- Narendra Singh, 75, Independent non-executive director, 14.01.1993
Note that the date of appointment, in some cases, may be the date of appointment at this designation and may have joined the company even earlier. Therefore, this data should not be considered comprehensive or even accurate but only what is available in the public domain at this point.
With that caveat, it does appear that KP Singh and Narendra Singh fulfil the minimum service requirements in 2013 as required for this scheme.
Here is the postal ballot from the BSE website (link).