In what could be termed as the new kind of shareholder activism, Tata Motors' stakeholders, including institutional shareholders refused to ratify excess remuneration of about Rs20.28 crore to its executive directors
Tata Motors Ltd, the country's largest vehicle maker, received a kind of set back, when public shareholders, including institutional investors rejected the company's proposals to increase remuneration of its executive directors, including its erstwhile managing director Karl Slym, due to the fact that the company may not have adequate profits for FY14.
"Companies should recognize that minority investors are increasingly assertive on company matters and companies should, in the interest of good corporate governance, take the views of these investors into account when putting forth various proposals," said InGovern Research Services Pvt Ltd in a report.
In a regulatory filing, the Tata group company said, "The six special resolutions required approval of at least 75% of the votes by voting members. Resolution Nos.4, 5 and 6 were passed by shareholders and Resolution Nos.1, 2 and 3 have not been passed by the shareholders by the requisite majority."
The resolutions were:
1. Approval for payment of minimum remuneration to Ravindra Pisharody, Executive Director (Commercial Vehicles) in case of inadequacy of profits and ratification of the excess remuneration of Rs3.20 crore paid for the financial year ended 31 March 2014 (REJECTED)
2. Approval for payment of minimum remuneration to Satish Borwankar, Executive Director (Quality) in case of inadequacy of profits and ratification of the excess remuneration of Rs2.44 crore paid for the financial year ended 31 March 2014 (REJECTED)
3. Approval and ratification of the excess remuneration of Rs14.64 crore paid to (late) Karl Slym, Managing Director/ his legal heir in view of inadequacy of profits for the financial year ended 31 March 2014 (REJECTED)
4. Extension of validity of the borrowing powers of the Board (ACCEPTED)
5. Creation of charge on Company’s properties (ACCEPTED)
6. To offer or invite for subscription of Non-Convertible Debentures on private placement basis (ACCEPTED)
According to InGovern, the first three resolutions relating to ratification of excess remuneration, aggregating Rs20.28 crore, of the executive directors (including the erstwhile MD) are due to the fact that the company may have no/ inadequate profits for FY14. "The Resolution Nos.1 and 2 also seek approval for payment of a minimum remuneration to Mr Borwankar and Mr Pisharody, during FY15, FY16 and FY17 in case the company has no/ inadequate profits. The minimum remuneration for both executive directors includes a salary of upto Rs7 lakh per month, incentive (if any), benefits, perquisites and allowances," it said in a report.
Source: InGovern
As evident from the voting results, the institutional investors have decisively voted against the ratification of excess remuneration aggregating Rs20.28 crore to the executive directors, the report said.
The Bengaluru-based proxy advisory said, "InGovern believes executive directors and MD are tasked with setting the company’s long-term and short-term strategy and are responsible for the company’s operational performance. Hence their remuneration and incentives should ideally be aligned with the financial performance of the company. InGovern is against increase in remuneration in case of decline in financial performance or payment of excessive remuneration to directors of perennially under-performing companies."
Earlier in 2011, shareholders of Seamec and ARSS Infrastructure Projects also voted against increase in/ payment of excess remuneration.
Tata Motors closed Friday marginally higher at Rs470.5 on the BSE, while the 30-share Sensex too ended the day marginally up at 25,957.
E-voting - a great revolution.
Is it through e-voting public shareholders asserted their right?
I think many shareholders who never voted on resolutions of companies are now coming forward to vote through e- voting.