SALARIES OF AUTO FIRMS’ PROMOTERS RISE EVEN AS BIZ FACES HEADWINDS

This is despite the biz facing headwinds

Despite it being a forgettable year for the automobile industry, promoters who act as top executives in their companies gave themselves a healthy raise in FY21.

Promoter-executives took home fatter pay cheques though their companies’ fortunes were at a low ebb owing to the pandemic, which also led to lower growth or stagnant salaries of other employees.

In FY21, the industry saw significant disruption, which restricted production and customer movement. Despite the resumption of business, vehicle sales are facing challenges.

Last week, institutional shareholders of Eicher Motors voted against the re-appointment of Siddhartha Lal as managing director (MD), protesting the proposal to raise his salary by 10 per cent. Shareholders were against the amount of salary hike for Lal, considering that the company’s revenues and profit growth had been hit by the pandemic.

“Ideally promoters should take their compensation in the form of dividend and not as a cash component, as they should be ready to share the risk or rewards with other shareholders,” said Sriram Subramanian, managing director of proxy advisory firm Ingovern.

The salary gap between the toppaid promoter-executives and other employees has also increased significantly as seen from the median remuneration, indicating that the average salary paid to the employees of these companies was either lower or remained stagnant in FY21 against FY20. The median represents the central figure in a distribution. In this case it would mean half the employees in the organisation earn less than the figure while the other half makes more.

Pawan Munjal, chairman and managing director of Hero Motocorp, leads the pack among CEOS. Munjal, who is also the promoter of India’s largest two-wheeler maker, saw his pay package rise 2.77 per cent in FY21 to ~86.93 crore, making him one of the top paid CEOS in India Inc.

The gap between Munjal’s salary and that of an average Hero employee also increased as his salary was 826 times the median pay compared to 752 times in FY20. But his company’s profit before tax (PBT) in FY21 fell by 14.72 per cent year-on-year.

Promoter CEOS are not only paid a salary but also get crores every year in the form of dividend. Take the case of the Munjal family. With a 34.76 per cent stake, they received over ~700 crore in dividend last financial year.

Similarly, Rajiv Bajaj, who is MD of Bajaj Auto, saw his pay package grow in FY21. The 54-year-old’s remuneration went up 1.62 per cent to ~40.5 crore last year from ~39.86 crore in FY20. Bajaj, who holds 754,200 shares of the company, earned around ~10.55 crore from dividend, which was fixed at ~140 per share for FY21.

Other top executives of the firm — Executive Director Rakesh Sharma and Chief Financial Officer Soumen Ray — saw their salaries rise significantly by 10.6 per cent and 26 per cent, respectively. For an average Bajaj employee, the salary increased by 1.36 per cent in FY21. The company saw its profitability decrease by 9.7 per cent but decided against a salary cut despite announcing a pay deduction of 10 per cent in April 2020.

Venu Srinivasan of TVS Motors has been an exception whose pay was reduced by 2 per cent in FY21 while the average salary of an employee of the company went up by 2 per cent. The 67-year-old patriarch of TVS Group in FY20 too had taken a voluntary pay cut with his remuneration going down by 22 per cent.

In contrast, management-led companies were more mindful about pay hikes to top bosses.