Eicher Motors on Monday said it has 'unanimously' decided to reappoint Siddhartha Lal as Managing Director of the company with effect from May 1, 2021, with changes in his remuneration package, a week after the company's shareholders rejected the proposal.
The company said that the board of directors on Monday discussed the outcome of the 39th AGM held on August 17, 2021. The matter pertaining to the reappointment of Lal as Managing Director and the remuneration proposal was discussed comprehensively, and the Board unanimously decided to reappoint him as Managing Director, with effect from May 1, 2021, Eicher Motors said in a statement.
The Board will now go back to shareholders for approval through postal ballot, it added.
Last week, the company's shareholders had rejected the reappointment of Lal as Managing Director. The shareholders had voted against the proposal mainly due to the proposed increase in Lal's remuneration package. "The Nomination and Remuneration Committee (NRC) of the company has considered all the factors, including inputs from various stakeholders including institutional investors before recommending remuneration for key managerial persons. The primary concern with investors was not Siddhartha's reappointment as Managing Director or the proposed compensation; it was the lack of clarity regarding the enabling provision that potentially allowed payment of remuneration up to 3 per cent of profits," Eicher Motors Chairman S Sandilya said.
Over the last four years, the company has had the same limit of 3 per cent, but in reality have paid only a fraction of that amount, he added. "The actual remuneration during FY2021 was at 1.04 per cent of profits, with the preceding years being at a lower percentage," Sandilya said.
Given the background of actual remuneration paid to the Managing Director in preceding years, the Board has now approved a revised remuneration structure for the Managing Director, with a maximum cap of 1.5 per cent of profits, the company said.
Specific details of the remuneration are being shared via the postal ballot, it added.
"The remuneration increase in FY2021 is in line with the average 9.7 per cent increment given to all company employees for the year. The median, which is a measure of central tendency, is impacted by entry and exits of employees," Eicher Motors Independent Director and Chairperson of the Nomination and Remuneration Committee Manvi Sinha noted.
During FY2021, 267 employees joined the company, out of which 77 per cent were hired at below the median salary and 284 employees exited the company out of which 66 per cent were drawing higher than the median salary, she added.
"Owing to this, despite there being a 9.7 per cent average increase in salaries at Eicher Motors in FY2021, the median shows an increase of just 1 per cent. The board fully supports Siddhartha's appointment as Managing Director and his proposed compensation, and we are confident that our shareholders will support these resolutions as well," Sinha said.
Elaborating on the role played by Lal in the growth of the company, Sandilya said that he has been the architect of Eicher Motors' growth story over the last two decades. "When he took over as CEO of Royal Enfield in 2000, the division was making large losses and was slated for closure. Siddhartha has transformed Royal Enfield into a formidable premium motorcycling brand in India, pioneering the leisure riding segment," he stated.
Royal Enfield, a part of Eicher Motors, grew the premium over 250cc market in India exponentially, and has maintained over 90 per cent market share in it for the last decade, resulting in EBITDA margins for EML at over 30 per cent during the pre-pandemic peak, Sandilya noted. Subsequently, Lal moved to the UK in 2015 to personally drive the company's ambition of becoming the first global premium consumer brand to emerge from India; there he was directly overseeing the product development and international expansion, he added.
"Going forward, Siddhartha and his team at EML have charted out exciting and robust plans for the future. Royal Enfield, already the global leader in middleweight motorcycles (250cc-750cc), is on the path to growing this segment multi-fold globally and becoming the first global consumer brand to emerge from India. Also, under the chairmanship of Siddhartha, VE Commercial Vehicles is all set to attain new heights by leading the modernisation and transformation of India's commercial vehicle sector," Sandilya said.
In addition to the motorcycle business, Eicher motors has a joint venture with Sweden's AB Volvo — VE Commercial Vehicles Limited (VECV). During the company's 39th AGM earlier this month, while 73 per cent of the votes favoured Lal's reappointment as Managing Director, the rest 27 per cent were against it. As a special resolution, it needed support from 75 per cent of the votes cast to pass the proposal. Out of the total 21,74,67,139 votes, 15,88,49,543 (73.04 per cent) were in favour of the reappointment while 5,86,17,596 (26.95 per cent) votes disapproved the proposal. The company's public institutional shareholders particularly opposed the move.