Tata Motors seeks shareholder nod for ED salaries

Five months after investor activism forced Tata Motors, the country’s biggest automotive manufacturer, to do a rethink on the pay offered to its senior management, the company is again seeking shareholder approval on remuneration to two executive directors (EDs).

The two are Ravindra Pisharody and Satish Borwankar — whose packages were contested by shareholders and proxy advisory firms when the company posted a loss at the standalone level last year.

The proposed package is much higher than the annual ceiling of Rs 48 lakh permitted under the old Companies Act (of 1956). Tata Motors is citing guidelines under the new Companies Act (of 2013) that allows fixing of salaries on a company's effective capital, instead of operational performance.

The approval is being re-sought by a special resolution through a postal ballot. The company has also cited a survey by independent consultant Aon Hewitt, depicting the average salary increase at around 10 per cent. “Remuneration paid/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,” added the Mumbai-based company.

Tata Motors estimates the new total remuneration for the current year, where it has posted a standalone loss of Rs 1,452 crore in the first half, would 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 said. 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.

In July, the company failed to get the requisite majority of 75 per cent of votes in favour of the proposed remuneration of three directors for last year. Proxy advisory firms such as Stakeholders Empowerment Services (SES) had opposed this, stating this breached the limits under the old Companies Act.

In case of no or inadequate profit, a company could pay remuneration up to the ceiling limit as specified in Schedule XIII (Rs 48 lakh, according to the slab applicable to Tata Motors). Any excess is subject to members’ approval by way of a special resolution and compliance of disclosure requirements. Nearly 30 per cent of the votes had been cast against the resolution.

A little more than 64 per cent of the financial institutions, which hold a 37 per cent stake in the company, voted against the resolution.

J N Gupta, managing director of SES, said, “We are yet to check if this is according to the new Companies Act. If they (Tata Motors) are in compliance, then we have no option but to say yes in the postal ballot.”