Tata Motors get shareholders' nod for ED salaries

Tata Motors, the country’s biggest automobile maker, has received the votes needed for paying its executive directors (ED) according to plans that were earlier contested by shareholders and proxy advisory firms.

Remuneration to executive directors Ravindra Pisharody and Satish Borwankar, has been approved not only for the past financial year but for the current and next year. Remuneration to late managing director Karl Slym for last year has also been approved. Voting was carried out through a postal ballot for the special resolution.

The company secured the 75 per cent votes required to approve the remuneration packages for the three directors. While 99.69 per cent votes were in favour of the resolution for approving the packages for past year, not everyone approved packages proposed by the company’s board for this year and the next.

Though the company secured a total of 81 per cent in support for packages for the two years for the two directors, 30-33 per cent votes were cast against the resolution by institutional shareholders and the general public. The promoter group voted fully in favour.

“We are happy to note the strong positive voting from the shareholders in favour of our resolutions. We were committed to a completely transparent process and through deeper direct engagement with the shareholders that enriched our mutual understanding we proactively addressed their concerns and queries before we put the resolutions to a re-vote. These positive results are an endorsement of the company’s disclosure and governance policies and indicate the shareholders’ faith in the company’s management, especially as it works towards a turnaround in a challenging market situation,” a statement from Tata Motors said.

In case of inadequate profits, a company can pay remuneration up to the ceiling prescribed — Rs 48 lakh, according to the slab applicable to Tata Motors. Any amount in excess is subject to members’ approval by way of a special resolution and compliance of disclosure requirements.

For Pisharody and Borwankar, the company had proposed a salary of up to Rs 7 lakh a month, besides incentives, benefits, perquisites and allowances. Pisharody’s total annual payout totalled Rs 3.75 crore last year, while Borwankar’s stood at Rs 2.98 crore. Slym’s total pay stood at Rs 12.84 crore.

Tata Motors re-sought shareholder approval last December. To justify its move the company cited a survey by independent consultant Aon Hewitt, depicting the average salary increase of around 10 per cent.

“Remuneration payable to the two EDs and the late MD (managing director) for FY2013-14 is commensurate with industry standards and board-level positions held in similar-sized companies, taking into consideration the individual responsibilities shouldered,” Tata Motors had said.

Though the company has not specified the exact remuneration payable to the two directors, Tata Motors estimates the new total remuneration for the current year, in which it has posted a standalone loss of Rs 1,452 crore in the first half, will see a cut of 12 and six per cent for Pisharody and Borwankar, respectively.

“Based on the company’s effective capital of Rs 10,643.04 crore, the maximum permissible remuneration limits per wholetime director is Rs 3.28 crore per annum, in case of no inadequacy of profits during FY14-15,” it had said last month. Thus the total remuneration payable is Rs 3.31 crore for Pisharody as against the Rs 3.75 crore proposed to be paid last year. Borwankar is estimated to get Rs 2.67 crore this year as against the Rs 2.82 crore proposed last year.

Institutional Investor Advisory Services (IIAS) agreed that the shareholders took the right call by approving the pay packages.

“The company did well to approach the shareholders. The first time the resolutions were defeated primarily on account of a large number of ADR holders taking a narrow interpretation of the rules governing the remuneration and consequently not supporting the resolution. The investors seem to have realised that the two executive directors, are professionals, with significant experience in the automobile industry. Further that their proposed remuneration is in line with industry peers, and commensurate with the size and nature of a large and complex company like Tata Motors.”