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Shareholders reject Tata Motors executive pay proposal

Shareholders reject Tata Motors executive pay proposal

By Avantika Chilkoti in Mumbai

Shareholders have rejected a pay proposal for three senior executives at Tata Motors, the struggling Indian carmaker, highlighting a trend towards greater investor activism in Asia’s third-largest economy.

The company may now be forced to ask for the return of payments already made to the executives, including to the legal heir of the late Karl Slym, Tata Motors’ former managing director who died earlier this year after a fall from a Bangkok hotel.

Under Indian law, a company that makes low or no profit requires approval from three-quarters of its shareholders to pay executives an annual salary in excess of certain limits. The law does not address how a company might specifically go about recovering salaries paid before having sought approval.

Tata Motors said it is considering its options, which include returning to shareholders for a re-vote given that it secured 70 per cent approval, not far off the required threshold.

“It’s not that Tata Motors was paying a large sum of money,” said Amit Tandon, director of Institutional Investor Advisory Services, a shareholder advocacy group. “These are all professionals – it’s not that they are owners that are taking money out of the company and putting it in their pocket.”

Salaries for executives at Jaguar Land Rover, the UK unit Tata acquired from Ford in 2008, will not be affected. Sales at the luxury carmaker have continued to grow, helped by strong demand in China.

According to Tata Motors’ latest annual report Mr Slym was paid a salary of Rs11.1m ($186,000) in the 2014 financial year, while executive directors Ravindra Pisharody and Satish Borwankar received Rs5.7m and Rs4.5m, respectively.

The maximum the company could pay without seeking shareholder permission was Rs4.8m.

The salaries, which were approved in the previous financial year, have come into question after Tata Motors reported a loss of Rs10.3bn before tax in the fiscal year that ended in March, on revenues of Rs342.9bn.

Deepesh Rathore, director of Emerging Markets Automotive Advisors, a New Delhi-based research group, said shareholder disapproval was not surprising, noting that ”successive attempts at say, entering new product segments?.?.?.?have not really worked out well”.

“They’ve done worse than the rest of the market,” Mr Rathore added. “The Tata Motors brand is weak so even if the market recovers it could be difficult for them to get customers to return.”

The Indian car market shrank 4.7 per cent in the financial year through March, according to data from the Society of Indian Automobile Manufacturers.

The vote against Tata Motors also adds to signs of increasing shareholder activism in India, where many of the country’s largest businesses are run by powerful founding families.

Earlier this year, Maruti Suzuki, India’s largest carmaker by sales, drew the ire of shareholders with its decision to hand over construction of a new $500m factory in the western state of Gujarat to Japanese parent Suzuki.

“This is not the last time you’re going to see such behaviour from investors,” Mr Tandon added.