Pallavi Shroff Gives Up Asian Paints Board Seat As Proxy Firm Raises Conflict Of Interest
Eminent legal eagle Pallavi Shroff has decided to forgo the renewal of her board membership at India's leading paints manufacturer Asian Paints as proxy advisory firm InGovern and IIAS had asked shareholders to vote her out of the company board due to likely potential conflict of interest.
Shroff is the Managing Partner of Shardul Amarchand Mangaldas & Co (SAM), India's leading corporate law firm. InGovern believed Shroff's board position at Asian Paints could give rise to a conflict since the company has engaged with lawfirm Shardul Amarchand Mangaldas & Co. for professional services, where Sharoff is a Managing Partner. Shroff was appointed on the Asian Paints board as an independent director in 2019 and her renewal came up this month.
InGovern said the company had not disclosed details for their engagement with SAM in the explanatory notes of the notice seeking her re-appointment as an independent director.
Asian Paints had mentioned in its annual report for FY 2022-23 that “Pallavi Shroff, Independent Director of the Company, is the Joint-Managing Partner of Shardul Amarchand Mangaldas & Co., Solicitors & Advocates, from which the Company takes professional services. For details pertaining to transactions with Shardul Amarchand Mangaldas & Co. during the financial year 2022-23, refer Note no. 38 to the standalone financial statements of the Company forming part of this Integrated Annual Report. The quantum of fees paid to Shardul Amarchand Mangaldas & Co. is an insignificant portion of their total revenue, thus, Shardul Amarchand Mangaldas & Co., is not construed as having any material association with the Company.”
"As a best practice we recommend that there should not be any pecuniary relationship between an Independent Director and the company which could result in a possibility for conflict of interest," InGovern said.
Also, as per Companies Act 2013, “An independent director in relation to a company, means a director other than a managing director or a whole-time director or a nominee director, — (c) who has or had no pecuniary relationship, other than remuneration as such director or having transaction not exceeding ten per cent. of his total income or such amount as may be prescribed. with the company, its holding, subsidiary or associate company, or their promoters, or directors, during the two immediately preceding financial years or during the current financial year," InGovern said.
According to InGovern, if Asian Paints wanted to benefit from her experience and her expertise, than the company appoint her as a Non-Executive Non-Independent Director instead.
She was a member of the Audit Committee and a member of the risk management committee. Total remuneration paid for FY 2022-23 was Rs. 55.20 lakhs consisting of Rs. 13.20 lakhs as sitting fees and Rs. 42 lakhs as commission.
For Shardul Amarchand Mangaldas & Co., the transaction amount as shown in the Annual Report for FY 2022-23 stands at services received of Rs. 1.52 crores (Rs. 2.34 crores last year) and outstanding amount of Rs. 44 lakhs.
