Forced by minority shareholders to reconsider the re-appointment of Neeraj Kanwar as managing director, Apollo Tyres said on Wednesday the board would back the re-appointment while seeking an independent assessment on the compensation. Minority shareholders had defeated a special resolution to extend Kanwar’s tenure beyond 2019, ostensibly unhappy with the very high compensation package, estimated by proxy advisory firm IIAS at around Rs 65 crore.
The company said the board will now seek shareholder guidance and independent opinion on Kanwar’s compensation. Kanwar is son of Onkar Singh Kanwar chairman and managing director. What has upset shareholders is that the increases in the remuneration have been steep at a time when the company has not been doing well.
In 2017-18, for instance, when the company’s profits fell 34% to Rs 724 crore, Neeraj Kanwar took home Rs 44.6 crore, a 45% increase over the remuneration earned in 2016-17. As IIAS has pointed out, the ratio of this remuneration to the median employee salary at the company was 940 times. Father and son together made Rs 94.2 crore, which was 13.1% of the net profits.
Neeraj Kanwar’s remuneration has risen sharply since 2013-14, when he received Rs 14 crore. While a large portion of his salary is performance-linked, there is no absolute cap on the commission up to 5% of the net profits. Over 56% of the institutional investors of the tyre manufacturer and 49% of the retail shareholders voted against the resolution.
The board of Apollo Tyres has several independent directors including former CAG Vinod Rai, Anjali Bansal, Shardul Amarchand Mangaldas managing partner Pallavi Shroff, Shardul Amarchand Mangaldas managing partner A Chudasama, retired IAS officer Vikram Mehta and former Indian Army chief Bikram Singh.
IIAS pointed out in a note that KM Mammen, chairperson and managing of MRF, the country’s largest tyre maker, drew Rs 26.1 crore in FY18, 2.3% of the company’s annual profits, while CEAT Tyres MD Anant Goenka took home 1.6% of a profit of Rs 240 crore in FY18 as remuneration, Rajeev Anand of Goodyear India received Rs 5.3 crore for his services as chairperson and MD with the company reporting a net profit of Rs 130 crore.
The special resolution was defeated since Section 114(2)(c) of the Companies Act, 2013, requires “the votes cast in favour of the resolution, whether on a show of hands, or electronically or on a poll, as the case may be, by members who, being entitled so to do, vote in person or by proxy or by postal ballot are required to be not less than three times the number of the votes, if any, cast against the resolution by members so entitled and voting. The number of votes cast in favour of the resolution was 3.2 billion while the number 1.22 billion; it was just 2.6 times”.