Tatas Pro­pose ‘Loy­alty’ In­cen­tives in Cash for Group Top Ex­ec­u­tives

Of­fi­cials, who’ve served group for over 3 years, may get .₹ 30 l and more

The Economic Times - - Career & Business Life/companies - Dev­ina.Sen­gupta @times­group.com

Mum­bai: Tata Sons has pro­posed to re­ward top-rung ex­ec­u­tives at the group for loy­alty with long-term in­cen­tives (LTIs) in the form of cash.

“Over the past two months, we have been dis­cussing de­tails of the frame­work with group com­pa­nies for de­lib­er­a­tion and adop­tion by their boards,” said NS Ra­jan, the group chief hu­man re­sources of­fi­cer at Tata Sons.

The group firms’ last round of meet­ings with HR on the new com­pen­sa­tion struc­ture took place a cou­ple of weeks ago and sources said the re­sponse had been pos­i­tive. The frame­work is ex­pected to be adopted if in­di­vid­ual boards agree to it. Tata Sons, the hold­ing

com­pany of the di­ver­si­fied con­glom­er­ate, has al­ready cleared the new com­pen­sa­tion struc­ture.

Each firm will take a call on an ex­ec­u­tive’s min­i­mum em­ploy­ment ten­ure be­fore the in­cen­tives kick in. “LTI is in line with the Tata Group fo­cus on long-term value cre­ation. It is to en­able longterm ori­en­ta­tion and not just re­ten­tion of lead­er­ship,” Ra­jan said, with­out dis­clos­ing de­tails of the pro­gramme.

Ac­cord­ing to a search firm that works with some of the Tata com- pa­nies, LTIs should be 10-15% of the salary drawn by the top brass. “This, for the top deck, could be .₹ 30 lakh and more, if they re­main with the firm for three years,” said the manag­ing part­ner of the Mum­bai–based firm, who did not wish to be named.

Long-term in­cen­tives are of­fered ei­ther as em­ployee stock op­tions or cash af­ter the in­di­vid­ual com­pletes a stip­u­lated pe­riod of time in em­ploy­ment, usu­ally, at least three years. Looked upon as a re­ten­tion mea­sure, LTIs are com­mon in sec­tors where at­tri­tion is high, such as in­for­ma­tion tech­nol­ogy and ecom­merce.

“It is com­mon for busi­ness groups to pro­vide long-term in­cen­tives to their top man­age­ment. This helps them align the in­di­vid­ual’s goals to busi­ness goals of the com­pany and the group. It also works as a re­ten­tion tool,” said the com­pen­sa­tion head of a top global con­sult­ing firm, also re­quest­ing anonymity. The group has some 100 com­pa­nies in its fold and has been relook­ing at its fo­cus ar­eas af­ter chair­man Cyrus Mistry took over the reins in 2010. In the past year, it rolled out a se­ries of ini­tia­tives to de­velop the lead­er­ship pipeline.

Last week, its UK steel busi­ness housed un­der Tata Steel Europe was put on the block af­ter it tried to res­cue it in the past nine years.

In 2014, Mistry iden­ti­fied four clus­ters — realty and in­fra­struc­ture, de­fence and aerospace, con­sumer and re­tail and fi­nan­cial ser­vices — the group woulsd con­cen­trate on in the next decade un­der Vision 2025. The group is aim­ing to dou­ble its mar­ket value to $350 bil­lion in the next eight years.

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