ITC Ltd. wants to pay around Rs 1 crore a month to former Chief Executive Officer Yogesh Deveshwar for advising his successor Sanjiv Puri and ensuring a smooth transition. A proxy advisory firm doesn't find it appropriate.
Institutional Investor Advisory Services has recommended shareholders to vote against the proposal. The succession plan at ITC, if approved by shareholders, will see Deveshwar taking home a remuneration that will be higher than 90 percent of the top executives of BSE 500 companies, said IiAS in an emailed note. It estimates that the plan will take Deveshwar's earnings to Rs 12.7 crore a year, more than Puri's Rs 11.6 crore.
The choice of a successor was a widely discussed issue at ITC, IiAS said, as Deveshwar was at the helm for over 20 years during which the company's revenue multiplied over 12-fold and profit rose 40 times. More importantly, Deveshwar reduced the conglomerate's dependence on cigarettes.
ITC elevated Puri from the chief operating officer to CEO after Deveshwar stepped aside in February. Deveshwar was, however, brought back as non-executive chairman for three years, a role specially created for him.
The cigarette-to-soap maker didn't immediately respond to BloombergQuint's emailed query.
Despite Deveshwar's illustrious achievements, IiAS said, his higher remuneration is undermining Puri's role as the CEO and sends mixed messages to shareholders about his competence
Notwithstanding his astounding accomplishments, now that ITC has a new CEO, Yogi Deveshwar needs to let go and the board of ITC must quickly get used to a new normal.IiAS Institutional Eye
The proxy advisory said that a monthly pay suggests that Deveshwar will be actively involved in operations and decision making, which means Puri may not get a free rein to drive the conglomerate his way.
Shareholders of ITC will vote on the proposal at the company's annual general meeting on July 28.
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