Shareholders of Eicher Motors Ltd., the parent company of India's largest cruiser bike, Royal Enfield, have voted against the re-appointment of Siddhartha Lal as managing director for a period of five years, at the company's 39th Annual general meeting.
The resolution to reappoint him also included an increase in Lal's remuneration. The company hadn't specified the quantum of raise to Lal, and had said the remuneration will be based on net profit and shall not exceed 3% of the net profit of the company, similar to the last remuneration proposal put to vote in August 2017.
As a special resolution it needed support from 75% of the votes cast to pass. Instead it got 73%.
While a sizeable number of public institutional shareholder votes were cast at 77.47%, a majority of them, 72%, were against the proposal.
Meanwhile, an ordinary resolution seeking Lal's re-appointment as a director on Eicher Motors' board was approved by shareholders. Though, 36.66% of the public institutional votes cast were against it.
One Eicher Motors executive said, requesting anonymity, that the rejection of reappointment was over Lal's increased compensation.
The proposal to approve payment of remuneration to S Sandilya, non-executive chairman and independent director of the company, barely succeeded. Also a special resolution, it got support from 75.54% of the votes cast.
The proposal sought shareholder approval to pay Sandilya a remuneration which may exceed 50% of the total remuneration payable to all the non-executive directors of the company.
Remuneration Concerns
Proxy advisory firm IiAS had recommended shareholders vote against both proposals.
On the proposal to reappoint Lal and approve his remuneration the IiAS report said, "While we support his reappointment as Managing Director, his remuneration has not been commensurate with the overall performance of the company. Further, we raise concern over poor disclosure of his remuneration terms."
The proxy firm noted Lal's proposed remuneration is estimated at Rs. 23.23 crore, of which 32% is variable pay. The variable pay proportion has been declining over five years and the company must consider setting a cap on overall variable pay, the IiAS report said.
Responding to the final AGM vote outcome, Amit Tandon, founder and managing director of IiAS said "Such outcomes point to one, that investors are not voting with their eyes closed: 36% of the institutional shareholders voted against Siddhartha Lal's reappointment as a director by 72% against his compensation structure. Second, if you look at the voting pattern, investor votes have the potential to become a deterrent and act as a check."
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