PremiumThe reappointment comes after a special resolution for approving the appointment of Siddhartha Lal as MD and increase in his remuneration could not get a thumbs up from majority shareholders during the annual general meeting last week
The board of directors of Eicher Motors Ltd - country’s leading manufacturer of middleweight premium motorcycles – on Monday reappointed Siddhartha Lal as the managing director of the company and the company would seek an approval from shareholders in the comings months through a postal ballot.
The board though has decided to cap the compensation of Siddhartha Lal to 1.5% of the total profits to be earned by the company as opposed to its earlier proposal of 3% of the bottom-line. The reappointment comes after a special resolution for approving the appointment of Siddhartha Lal as MD and increase in his remuneration could not get a thumbs up from majority shareholders during the annual general meeting last week.
“Given the background of actual remuneration paid to the managing director in preceding years, the Board has now approved a revised remuneration structure for the managing director, with a maximum cap of 1.5% of profits as per Section 198 of the Companies Act. Specific details of the remuneration are being shared via the postal ballot," the company said in a statement.
The minority shareholders especially the institutional shareholders were opposed to an increase in compensation since the company’s sales and operating performance remained subdued over the last two years due to economic slowdown, Covid-19 pandemic and other reasons.
“The primary concern with investors was not Siddhartha’s reappointment as managing director or the proposed compensation; it was the lack of clarity regarding the enabling provision that potentially allowed payment of remuneration upto 3% of profits," said S Sandilya, chairman, Eicher Motors.
He further added that over the last four years, the company has had the same limit of 3%, but in reality, paid only a fraction of the amount. The actual remuneration during FY2021 was at 1.04% of profits, with the preceding years being at a lower percentage.
In FY 21, sales of Royal Enfield’s motorcycles dropped by 12% to 573438 units compared to 656651 units in FY 20, which was an 18.46% decline from FY 19. Wholesales took a hit sequentially in the first quarter of FY 22 due to the explosive growth in cases of Covid-19. Due to new regulations on emission and freight carrying capacity of trucks, Eicher’s commercial vehicle business has also been hit significantly since FY 19.
Due to softening of sales and increase in input costs, Eicher’s operating performance has also taking a beating in past few quarters.
In 2018, Onkar S Kanwar and Neeraj Kanwar, promoters of Apollo Tyres Ltd, were forced to take a salary cut of around 30% after minority shareholders rejected appointment of Neeraj Kanwar as the managing director of the company, as a result of a subdued financial performance of the company.
According to Manvi Sinha, independent director, Eicher Motors, the increase in remuneration in FY2021 is in line with the average 9.7% increment given to all company employees for the year.
“The median, which is a measure of central tendency, is impacted by entry and exits of employees. During FY 2021, 267 employees joined the company, out of which 77% were hired at below the median salary and 284 employees exited the company out of which 66% were drawing higher than the median salary. Owing to this, despite there being a 9.7% average increase in salaries at EML in FY2021, the median shows an increase of just 1%," she added.
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