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
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.