On August 17, at the company’s annual general meeting, shareholders had rejected a special resolution fixing Lal’s tenure for five years and a remuneration of up to 3% of the company’s profits.
On August 22, Eicher Motors’ board of directors reappointed Lal as the managing director and capped the salary at 1.5% of profits. However, the appointment and pay package were contingent on shareholders’ approval through postal ballot, which ended on October 24.
In the postal ballot, shareholders approved the ordinary resolution to re-appoint Lal as managing director for five years with 93.75% votes cast in favour, and the resolution to fix his remuneration at revised 1.5% of profits with 98.56% votes in favour.
The company said the primary concern of investors was not Lal’s reappointment or the proposed compensation, but the lack of clarity regarding the provision that potentially allowed paying a remuneration of up to 3% of profits. “Over the past four years, we have had the same limit of 3%, but in reality have paid only a fraction of that amount. The remuneration during FY21 was 1.04% of profits, with the preceding years being at a lower percentage,” the company had said in a statement after Lal’s reappointment.
Proxy advisory firm Institutional Investor Advisory Services (Iias), in its view on the resolution, had advised investors about the declining variable pay portion of Lal’s pay package, which is 32% at present. The advisory firm had said, “Lal’s variable pay as a proportion of total pay had been declining over the past five years. The company must consider setting a cap on overall variable pay.”
Also, “For FY21, remuneration paid to Siddhartha Lal was `21.12 crore, representing 340.3 times the median employee remuneration. While we support his reappointment as managing director, his remuneration has not been commensurate with the overall performance of the company. Further, we raise concern over poor disclosure of his remuneration terms,” it had said.
Eicher Motors had said Lal got a hike of around 9.97% in FY21 when the median employee hike was 1%. The remuneration increase in FY21 is in line with the average 9.7% increment given to all employees for the year. “The median, which is a measure of central tendency, is impacted by entries and exits of employees,” Manvi Sinha, independent director and chairperson of the nomination and remuneration committee at Eicher Motors, had said.
During FY21, 267 employees joined the company, of which 77% were hired at below-the-median salaries. Meanwhile, 284 employees left the firm, of whom 66% were drawing salaries higher than the median. Owing to this, despite a 9.7% average increase in salaries in FY21, the median shows an increase of just 1%, Sinha had said.
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