Mumbai: Guenter Karl Butschek, the newly appointed chief executive officer and managing director of Tata Motors Ltd is the highest paid among all non-promoter CEOs at auto makers listed on the stock exchanges in India.
Tata Motors appointed Butschek for the top job in mid-February after an extensive global search that lasted almost two years. Tata Motors has proposed an annual package of Rs.28-29 crore per year for Butschek, as per details on directors’ remuneration shared in the investor relations section of Tata Motors’ website.
The proposed remuneration of the former Airbus and Daimler AG executive is the highest among all the CEOs in the auto universe in India.
This is how salaries of Butschek’s peers in the auto industry stack up:
Pawan Goenka, executive director and group president for automotive and farm equipment sectors at Mahindra and Mahindra Ltd received a total remuneration of Rs.11.75 crore in the fiscal year that ended in March, up 11.75% (including pre-requisite value of employee stock options, or ESOPs, exercised) from a year ago, according to the company’s latest annual report. Goenka is one of the few non-promoter CEOs who drew more remuneration than the promoter. Anand G Mahindra, chairman and managing director, Mahindra Group, took home a package of Rs.6.59 crore, up 10.20% (including pre-requisite value of ESOPs exercised) from a year ago.
Vinod K. Dasari, managing director and chief executive at the Hinduja Group flagship Ashok Leyland Ltd, drew a package of Rs.8.3 crore in fiscal 2015-16, up 20% from a year ago.
K.N Radhakrishnan, president and chief executive at TVS Motor Co., earned a salary of Rs.4.55 crore in the same year.
Kenichi Auyukawa, managing director and CEO of car market leader Maruti Suzuki India Ltd, was paid Rs.3.3 crore in fiscal 2014-15. Maruti is yet to release its annual report for the year that ended in March 2016.
Besides other benefits, pre-requisites and allowances, Butschek will be allowed business-class travel four times a year for himself and his spouse to Austria. The package also included a one-time joining bonus of €250,000 payable in the first month of joining.
Butschek’s proposed pay was higher than the prescribed limits as defined under Section 198 of the Companies Act, which led Tata Motors to seek approval from the central government.
“Considering that (Mr) Butschek’s remuneration would exceed the said limits in the case of no/inadequacy of profits in any financial year and that he is a German citizen and non-resident of India, the approval of the central government is being sought,” Tata Motors said in its latest annual report.
“Pursuant to the provisions of Section 197 of the Companies Act, the remuneration payable to any one managing director or whole time director shall not exceed 5% of its profits as calculated under Section 198 of the Act and if there is more than one such director, the remuneration to them shall not exceed 10% of such profits,” it said.
In addition to Tata Motors India business, Butschek is also responsible for all other domestic and overseas subsidiaries, joint ventures and associates of Tata Motors (except the company’s UK subsidiary Jaguar Land Rover Automotive Plc).
His remuneration, the company said, is commensurate with that of expatriates appointed at CEO/MD levels of similar sized multinationals, taking into consideration his responsibilities.
“It is based on his past remuneration and has been subjected to peer level benchmarks for global automotive OEMs (original equipment manufacturers) as per survey conducted by Aon Hewitt, an independent consultant,” the company said.
Unlike two years ago, when proxy advisory firms had advised their shareholders to vote against the remuneration proposal of some of the senior directors, this time around no one is complaining.
“The compensation proposed to be paid to (Mr) Butschek is definitely one of the highest in the Indian automobile industry. However, considering the global nature of operations and the aspirations of the company, the company may be paying to get good talent to ensure that it can compete on a firm footing with its global competitors,” said Shriram Subramanian, founder of the independent proxy advisory and corporate governance firm InGovern.
“We do not find it (remuneration) very high, looking at the size and complexity of the business. You need a person with global experience who can steer the company out of the current situation,” said J.N. Gupta, founder of Stakeholders Empowerment Services (SES). Tata Motors, he said, has been struggling for two years.
Moreover, his salary is still far lower than those of promoter CEOs, he said, referring to Kalanithi Maran, chairman of SUN TV Network Ltd—his remuneration at the end of fiscal 2015 was Rs.61.26 crore—and Pawan Munjal chairman, managing director and CEO, HeroMoto Corp Ltd, who drew a package of Rs.44.62 crore.
In July 2014 minority shareholders of Tata Motors rejected a proposal for the payment of remuneration to its former managing director, Karl Slym, who had died in January, and two other executives in excess of permissible limits—the first instance when shareholders successfully stalled payment of excessive compensation to top executives in a company as large as the Tata group firm.
India’s largest auto maker failed to get 75% of the minority shareholder votes that is required for such a proposal to be approved.
Companies that seek to pay a whole-time director more than 5% of a company’s net profit are required by law to seek minority shareholders’ approval. Tata Motors, which recorded losses in the past two quarters, said it had to take stockholders’ sanction because of “inadequacy of profits”. Tata Motors eventually got shareholder consent through a postal ballot.