Mumbai: The Tata group has raised the remuneration of three key members of Corus Group Plc’s management ahead of Tata Steel Ltd’s formal takeover of Europe’s second-largest steel company on 12 April.
Philippe Varin, chief executive of Corus, has seen his base pay increased by over £52,000 (Rs44.72 lakh) per annum. The other two executives whose compensation has been hiked include David Lloyd, executive director finance, and Rauke Henstra, the division director strip products of Corus.
While Lloyd’s salary has been revised upwards by £30,000, Henstra will get £15,804 pounds more. The strip products division of Corus accounts for almost 56% of the company’s £7.18 billion annual sales.
While the salary of Corus chairman James W. Leng isn’t changing, he will be paid additional £750,000 “in recognition of the additional work that he has undertaken for the company” over the last two years, according to a regulatory filing sent to Corus shareholders as part of the buy-out offer that was reviewed by Mint.
After the acquisition, the largest in India’s corporate history, is completed, Leng will become a deputy chairman of Tata Steel.
The Tata group, which has been on a global acquisition spree, has been facing a challenge in inducting foreign professionals and fitting them into the existing systems of rewards and benefits given to all members of the Tata group’s elite Tata Administrative Service cadre.
Often, the benefits package payable to such foreign personnel is several times that of more senior personnel they report to, who are typically based in India. But the group, which will now derive a majority of its turnover from the international markets, has realized the need to adequately compensate top global talent, in line with competitive packages prevalent in global markets rather than based on what top management might be earning at headquarters.
On the face of it, just the annual hike given to Varin, who will also be appointed as a director on the board of Tata Steel, is almost equal to the annual salary of A.N. Singh, deputy managing director of Tata Steel, in fiscal 2005-06 at Rs45.61 lakh.
Varin’s new-base annual salary of Rs7.29 crore is almost 11.6 times that of Tata Steel managing director B. Muthuraman’s in the fiscal year 2005-06. Similarly, Lloyd’s new-base annual salary of Rs3.88 crore is 6.18 times that of Muthuraman’s, while Henstra’s Rs3.02 crore annual salary is 4.82 times that of the Tata Steel managing director.
But, given the cost-of-living and purchasing-power issues relative to where these executives live and work, those comparisons are little more than a theoritical, academic exercise. For instance, while the absolute hikes in salaries seem high, especially by Indian standards, they only represent single-digit percentage hikes for the relevant executives.
Lloyd, the 44-year-old, London-based chief financial officer, looks after a host of functions such as corporate finance, mergers and acquisitions and internal audit as well as shared services.
Considering Tata Steels plans to look for big savings in shared services, such as workers, by offshoring some functions, Lloyd is a key Corus executive for the parent company to try and retain.
Under the proposed deal, one year after completion of the takeover, Varin will be promoted to deputy managing director of Tata Steel. He is expected to replace Tridibesh Mukherjee, a former Corus employee who is currently deputy managing director (steel) of Tata Steel. He was paid a base annual salary of Rs54.71 lakh in fiscal 05-06.
Mukherjee retires at the end of October on reaching the maximum retirement age at the Tata Group companies.
Varin, who was appointed CEO of Corus in May 2003, is credited with turning around the struggling company, which, on an average, earned operating profit margins that were around six percentage points less than even its European peers.
In a programme called ‘Restoring Success,’ Varin managed to achieve savings of £620 million—over 98%—of a targeted £635 million.