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IiAS Recommends Voting Against Mallya's Reappointment

Published on Fri, Sep 19,2014 | 11:46, Updated at Fri, Sep 19 at 11:46Source : 

United Spirits: IiAS recommends voting AGAINST Dr. Vijay Mallya's reappointment and revision in PA Murali's remuneration

United Spirits, at its AGM scheduled on September 30, 2014, proposes to reappoint Dr. Vijay Mallya and revise PA Murali’s remuneration.

Dr. Vijay Mallya has been declared a wilful defaulter by several banks in connection with their lending to Kingfisher Airlines. According to an RBI circular, banks must not extend loans to companies where a director is considered a wilful defaulter. IiAS recognizes that USL is a Diageo subsidiary, and can access funds support from its parent company. However, this is not an optimum way of doing business. Further, IiAS understands that the decision to declare Vijay Mallya  a ‘wilful defaulter’ is being contested by Kingfisher Airlines and Vijay  Mallya. But, until this matter is resolved Vijay Mallya continuing on the board will constrain USL’s ability to raise debt from the Indian financial system. Therefore, IiAS recommends voting AGAINST his reappointment.   

PA Murali has been part of the UB group for over two decades. Prior to being appointed as Executive Director in 2013, he was USL’s Joint President and Chief Financial Officer. Therefore, PA Murali is answerable for the intra-group transactions for which USL has taken write-offs and provided for in its 2013-14 financial statement. Given that context, IiAS recommends that PA Murali step down from his directorship on the board. USL proposes to revise PA Murali’s remuneration from Rs 42.0 mn per annum to Rs 128.9 mn (includes Rs 50 mn paid in FY15 as one-time bonus). For nine months effective 4 July 2013, he was paid remuneration of Rs 47.8 mn. The proposed remuneration is not commensurate with the performance of the company, and is significantly higher than industry peers. Moreover, given that IiAS believes that PA Murali should step down from the board, a discussion on his remuneration is moot.  Therefore, IiAS recommends voting AGAINST the revision in his remuneration

For more details, please click here to view IiAS Voting Recommendations on United Spirits’ 2014 AGM resolutions.

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