Vote against reappointment of Harsh Mariwala: SES to Marico's shareholders

Seeks approval for revision in remuneration payable to Marico's cost auditors

Stakeholders Empowerment Services (SES) has advised shareholders of Marico to vote against the resolution of reappointment of Harsh Mariwala as director, liable to retire by rotation, and the ratification of remuneration payable to cost auditors.

SES has advised shareholders to vote in favour of the resolution of adoption of standalone and consolidated financial statements, confirmation of interim dividend already paid, reappointment of BSR & Co. LLP as statutory auditors of the company, and approval for revision in remuneration payable to Saugata Gupta, managing director and chief executive officer, Marico. 

It said in its report that Mariwala, non-executive promoter chairman, is being paid a commission of Rs 3.94 crore, while the other two promoter directors are being paid Rs 35 lakh each as commission.

It also said that the commission payable to Mariwala is more than 10x the average commission paid to other non-executive directors on the board. 

“Of the total commission of Rs 6.77 crore, a major chunk of approximately 58 per cent — or Rs 3.94 crore — is being paid to (Harsh) Mariwala,” SES said in its report. 

It said the fast-moving consumer goods company at its last annual general meeting (AGM) on August 30, 2021, had sought shareholder approval for payment of remuneration to Mariwala for 2021-22 (FY22). 

In an email response to Business Standard’s query, a spokesperson for Marico said, “Mariwala, founder of Marico and chairman of the board, has been instrumental in guiding the company’s long-term strategic imperatives, improving board effectiveness, and the corporate social responsibility agenda. The remuneration of Mariwala for FY22, as previously approved by shareholders at the 33rd AGM held in 2021, is in compliance with applicable provisions of the Companies Act, 2013, and the Securities and Exchange Board of India’s listing regulations, and commensurate with his roles and responsibilities as chairman of the board.”

The report also said that the board is seeking ratification of remuneration of Rs 10 lakh per annum payable to the cost auditors Ashwin Solanki & Associates for the financial year ending March 31, 2023, and asked shareholders to vote against it. It stated that disclosure of the audit fee proposed to the cost auditor alone becomes irrelevant if shareholders are unable to compare it with the scope of the cost audit. It said Marico has not disclosed the portion of the turnover that is subject to cost audit. Therefore, SES is assuming that the entire turnover of the company is subject to a cost audit.

It explained that the company’s turnover is Rs 7,500 crore and the minimum cost auditor fee suggested Rs 30 lakh plus negotiable and the remuneration proposed to be ratified Rs 10 lakhs plus taxes and out-of-pocket expense. 

It said the cost audit fee proposed is significantly smaller than the fee suggested by the Institute of Chartered Accountants of India, based on Marico’s turnover, and it has not provided any justification in the notice. 

“According to SES, shareholders of the company will not be able to know whether the cost audit remuneration is commensurate with the scope of the cost audit since the company has not disclosed the portion of the turnover that is subject to the cost audit,” it said in its report. 

“In the absence of any justification relating to the amount of cost audit fee payable, shareholders may not be able to take an informed decision regarding the adequacy/appropriateness of the fee proposed. SES is of the view that in order to get independent and good quality opinions/reports from professionals, their remuneration must be fair,” it added.

SES gave the company an overall environmental, social, and governance rating of ‘B+’.