Ahrm Ongc Cairn

7/29/2019 Ahrm Ongc Cairn

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Managerial Remuneration and

ESOP PlansBy- Digvijay

PoulamiTulika

Sulabh


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Cairn India


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Managerial Remuneration


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DIRECTORS REMUNERATION

The non-executive Directors do not have any material pecuniary relationship ortransactions with the Company, other than sitting fees / Directors remunerationpaid / payable to them.

The non-executive Directors are eligible for commission up to 1% of net profits aspermitted by the Companies Act,1956 and as approved by shareholders n the

annual general meeting held on 18 August, 2011.

None of the non-executive or independent Directors hold any equity shares orconvertible instruments of\ the Company.

During the year under review, 35,455 stock options were granted to Mr. P. Elango,interim CEO & Whole Time Director. He also exercised 27,081 stock options during

the year


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Remuneration Committee

The Board has a Remuneration Committee to make recommendations to theBoard as to the Companys framework or broad policy for the remuneration ofthe executive Directors and senior executives one level below the Board.

The objective of the Companys remuneration policy is to ensure that CairnIndias executive Directors and senior executives are sufficiently incentivised

for enhanced performance.

In determining this policy, the Committee takes into account factors it deemsrelevant and gives due regard to the interests of shareholders and to thefinancial and commercial health of the Company.

It ensures that levels of remuneration are sufficient to attract and retain senior

executives of the quality required to run the Company successfully.


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Within the terms of the agreed policy, the Committee determines the entireindividual remuneration package for the executive Directors.

The Committee is also responsible for overseeing the Companys shareoption schemes and long term incentive plans, which includes determinationof the eligibility for benefits and approval of total annual payments.


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Employee Stock Option Plans


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Number of options granted


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The vesting conditions of the above

plans are as under

CISMP plan

A. 6,714,233 options to be vested in the following manner-

1/3rd of the options vest on the day following the date on

which the equity shares have been admitted to listing on theStock Exchanges (admission date). Listing date was 9 Jan

2007.

1/3rd of the options vest 18 months after the admission date.

1/3rd of the options vest on achieving 30 days consecutiveproduction of over 1,50,000 bopd from the Rajasthan Block.


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B. 1,584,480 options to be vested in the followingmanner-

1/2 of the options vest on the day following the date on whichthe equity shares have been admitted to listing on the StockExchanges.

1/4th of the options vest on the date on which all majorequipment for the start-up of the Mangala field is delivered tosite.

1/4th of the options vest on achieving 100,000 bopd from theMangala Field.


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CIPOP plan (including phantom options)

I. Options will vest (i.e., become exercisable) at the end of a performance period

which has been set by the remuneration committee at the time of grant (although

such period will not be less than three years). However, the percentage of an

option which vests on this date will be determined by the extent to which pre-determined performance conditions have been satisfied.

II. Phantom options are exercisable proportionate to the period of service rendered

by the employee subject to completion of one year.


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CIESOP plan (including phantom options)

I. There are no specific vesting conditions under CIESOP plan other than completionof the minimum service period.

II. Phantom options are exercisable proportionate to the period of service rendered

by the employee subject to completion of one year.


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Effect of ESOPs


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Impact on Company financials

Impact of Fair Valuation Method on net profits and EPS

In March 2005, the Institute of Chartered Accountants of India has issued aguidance note on Accounting for Employees Share Based Payments applicable toemployee based share plan, the grant date in respect of which falls on or after April1, 2005.

The said guidance note requires the Profoma disclosures of the impact of the fairvalue method of accounting of employee stock compensation accounting in thefinancial statements.


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Applying the fair value based method defined in the said guidance note, the impacton the reported net profit and earnings per share would be as follows:


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Employee Stock Compensation Cost

Measurement and disclosure of the employee share-based payment plans isdone in accordance with SEBI (Employee Stock Option Scheme andEmployee Stock Purchase Scheme) Guidelines, 1999 and the Guidance Noteon Accounting for Employee Share-based Payments, issued by the ICAI.

The Company measures compensation cost relating to employee stockoptions using the intrinsic value method.

Compensation expense is amortized over the vesting period of the option ona straight line basis.


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Employee Benefits

The Company has no obligation, other than the contribution payable to theprovident fund and superannuation fund. The Company recognizescontribution payable to the provident fund and superannuation fund as anexpenditure, when an employee renders the related service.

If the contribution payable to the fund for service received before the balancesheet date exceeds the contribution already paid, the deficit payable to thefund is recognized as a liability after deducting the contribution already paid.

If the contribution already paid exceeds the contribution due for servicesreceived before the balance sheet date, then excess is recognized as an

asset to the extent that the pre payment will lead to, for example, a reductionin future payment or a cash refund.


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Gratuity liability is a defined benefit obligation and is provided for on the basisof an actuarial valuation on projected unit credit method made at the end ofeach financial year. The scheme is maintained and administered by aninsurer to which the trustees make periodic contributions.

Short term compensated absences are provided for based on estimates.

Long term compensated absences are provided for based on actuarialvaluation made at the end of each financial year. The actuarial valuation isdone on projected unit credit method.

Actuarial gains / losses are immediately taken to statement of profit and lossand are not deferred.


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ONGC


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ONGC Directors Remuneration


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Non-executive directors


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Directors Remuneration

Non-executive directors donot draw any remuneration. They get a sitting fees of20,000 rupees for each meeting attended by them.

REMUNERATION COMMITTEE

ONGC, being a Central Public Sector Undertaking, the appointment, tenure andremuneration of directors are decided by the Government of India.

However, as per the DPE Guidelines, a Remuneration Committee was constituted to decidethe annual bonus/variable pay pool and policy for its distribution within the prescribedlimits.

STOCK OPTIONS

The Company has not issued any Stock Options to its Directors/ Employees.


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THANK YOU

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Ahrm Ongc Cairn