Mumbai: Siddhartha Lal’s re-appointment as managing director of Eicher Motors Ltd has been voted down by shareholders. Sources told ET that they were basically against a proposal to increase his salary by 10% as it outpaced the company’s revenue and profit growth last year amid the Covid-19 pandemic.
A special resolution seeking his re-appointment – which was clubbed with the compensation hike proposal – failed to pass muster at the company’s 39thannual general meeting (AGM) on August 17, as most public institutional shareholders voted against. Shareholders questioned the company’s rationale of increasing Lal’s salary by 10% in FY21, even as the median employee salary had increased by only 1%.
Eicher Motors did not respond to ET’s emailed queries till press time Thursday.
Proposed Salary at ₹23.23cr
Based on the trend in the previous fiscal year, proxy advisory firm Institutional Investor Advisory Services (IIAS) estimated that his proposed salary in FY22 would be ₹23.23 crore — of which 32% is variable pay — compared to ₹21.2 crore in FY21.
The development comes just days after Vinod Dasari quit as the chief executive of Royal Enfield, the iconic maker of the Bullet brand motorcycles and a division of Eicher Motors, which quickly appointed chief operating officer B Govindarajan to drive the show.
An ordinary resolution seeking Lal’s re-appointment as a director on the Eicher Motors’ board was, however, approved by shareholders. Of the six resolutions put forth, the one pertaining to Lal’s reappointment as MD and his salary increase was thrown out.
The company has yet to take a call on approaching shareholders again with a revised proposal.
Shareholders have previously rejected salary hike proposals of Guenter Butschek, the former MD of Tata Motors, as well as Neeraj Kanwar, the MD of Apollo Tyres.
Lal is credited with turning around Eicher Motors’ fortunes through his razor-sharp focus on building the Royal Enfield brand and striking a joint venture deal with Swedish truck and bus maker Volvo.
The company has, however, faced headwinds recently due to the pandemic and a global chip shortage, resulting in its CV and motorcycle businesses reporting lower profits. As per the filing of postal ballots, 26.95% of total votes polled against the special resolution, while 73.04% were in favour.
Three-fourths of minority shareholders are required to approve a special resolution.
In the AGM, 72% of institutional investors who participated in e-voting rejected the resolution seeking Lal’s reappointment, stock exchange filings showed.
An executive at Eicher Motors clarified that the board had been informed of the outcome of the postal ballot on Lal’s reappointment and immediate action is already in place.
Promoters hold 50.78% stake in Eicher Motors, while Foreign Portfolio Investors have 28.83%.
Local mutual funds own 5.84% stake, 1.56% is with LIC and the remaining with other investors.
According to people in the know, while shareholders had no issue with Lal’s re-appointment as MD, they were against the compensation increase.
IIAS said it supported the reappointment of Lal as MD but not his remuneration package as it has not been commensurate with the company’s overall performance.
Shriram Subramanian, the managing director of InGovern, another proxy advisory firm, said over the past few years, investors have been focussed on the compensation received by promoters.
“We recommend that promoters should share the risk and rewards with the other shareholders and hence a large part of the promoter earnings should be based on dividends, rather than cash components,” he added.
Lal’s salary of ₹21.13 crore in FY21 represents 340 times the median employee salary. It grew at a compounded annual growth rate of 28% in the past three years, while the company’s operating profit and net profit dropped by 14% and 8%, respectively, in the same period.
Eicher Motors’ growth in motorcycle volumes dropped for a second consecutive time in the last fiscal year, while its operating profit margin has shrunk by 10% in the last three years.
Dasari’s decision to move is with an intention to dedicate time and energy to pursue his personal passion and ambition in affordable healthcare, the company said.
