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Home » News » Business » Tata Motors shareholders reject pay hike proposals of three executives
Tata Motors shareholders reject pay hike proposals of three executives

Tata Motors shareholders reject pay hike proposals of three executives

MUMBAI: Institutional investors and public shareholders in Tata MotorsBSE 0.70 % defeated proposals by the company on remuneration for three executives on the grounds that profit in the year to March was inadequate, in a move that reflects increasing activism by non-promoters.

The company disclosed the result of the postal ballot on Thursday. At the same time, plans by the company to borrow up to Rs 30,000 crore were overwhelmingly approved by shareholders, it said.

The three executives concerned are the late Karl Slym, former MD, Ravindra Pisharody, executive director, commercial vehicles, and Satish Borwankar, executive director, quality. The proposals got only 70% approval, failing to get the 75% that was needed.

Nearly 64% of institutional investors and 41% of public shareholders voted against the resolution.

In the past five months, this is the second instance in which non-promoter shareholders have opposed decisions taken by management Earlier, domestic mutual funds were against Maruti Suzuki IndiaBSE -0.03 % Ltd’s transfer of the upcoming Gujarat plant to Suzuki Motor Corporation.

The development has wider ramifications, said Anil Singhvi, founder and director, Institutional Investor Advisory Services, a proxy shareholder advisory firm.

“The event at Tata Motors should not be taken as an event of a company having lost three resolutions, but as a major event for all corporates in India to not take shareholders vote in AGMs for granted,” he said. “The resolutions which were put to vote and got defeated in Tata Motors were hitherto considered ordinary business by the board of directors, to be left to the company secretary to prepare the notice of the AGM and obtain the vote.”

Tata Motors said in a release that the proposals had been in line with market benchmarks and “based on a series of metrics relating to the company’s overall performance and health, and aggressive implementation of strategies for future growth”.

As for profit being inadequate, India’s economy has been caught in a slump, the company said. That has meant “weak consumer sentiment and subdued infrastructure activity. This slowdown impacted demand for the entire auto industry in FY 2013-14; the commercial vehicle industry, a mainstay of Tata Motors’ business and profitability, declined by 22.4% over the previous financial year, despite which Tata Motors retained its market lead”, the company said.

Experts said investors are becoming more active as awareness has increased and the market regulator has been pressing institutional investors to  actively participate in decision-making at companies, apart from shareholders being able to vote online.

“Investors are turning rational and participative. Companies can no longer take minority shareholders lightly,” said Shriram Subramanium, managing director of Ingovern, an institutional advisory. “Their interference will not be limited only to major decisions such as mergers and acquisitions, but now they will participate more in routine decisions such as auditor appointment, compensation to directors.”

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