In a rare instance for an Indian company, the shareholders of Tata Motors have rejected the remuneration plan drawn up by the company for its executive directors in the wake of the companys poor performance in the last fiscal.
In a filing to the bourses on Thursday, Tata Motors declared the results of a postal ballot held to seek shareholder approval for six special resolutions, including approval of remuneration to be paid to executive directors, borrowing powers of the board, creation of a charge on the companys assets and offer a subscription of non-convertible debentures.
While the remaining special resolutions were passed by the shareholders, resolutions pertaining to the approval of payment to directors in excess of their minimum entitlement were vetoed by shareholders.
These directors include Ravindra Pisharody, executive director (commercial vehicles), Satish Borwankar, executive director (quality) and Tata Motors late managing director Karl Slym, who died in January.
It is not common for special resolutions floated by Indian companies to get blocked due to lack of sufficient votes. A special resolution needs more than three-fourths of the number of votes to be cast in its favour in order to be passed.
Usually, promoters of firms can ensure the passage of a special resolution by virtue of their majority shareholding in the company, along with some help from institutional investors. Also, on many occasions retail shareholders do not fully participate in these postal ballots, which helps in the passage of the resolution.
Around 65% of the votes cast by institutional investors in Tata Motors and around 41% of the votes cast by retail shareholders went against the carmakers remuneration proposal.
Also, retail shareholders voted in large numbers in the ballot. The proportion of votes polled on the outstanding shares of the company held by retail shareholders stood at around 62%.
In the announcement of the postal ballot dated May 27, Tata Motors had sought shareholders approval for payment of remuneration to executive directors in excess of their minimum entitlement despite the company reporting inadequate profits for fiscal 2014.
Minimum entitlement in the case of that to be paid to Tata Motors executive directors comprised salary, dearness allowance, perquisites and other allowances, excluding commission.
It sought approval to pay Pisharody and Borwankar a salary of up to Rs 7 lakh per month each, which comes up to Rs 84 lakh a