July 4 (Bloomberg) -- Tata Motors Ltd. shareholders rejected a compensation package for the carmaker’s late India head, meaning his family may need to return most of the 152.5 million rupees ($2.6 million) they received.
Tata Motors, which already paid out the money, failed to receive the 75 percent approval rate it needed from investors to compensate late Managing Director Karl Slym with any more than 4.8 million rupees, spokeswoman Minari Shah said yesterday. Tata Motors’ profit was so low last year that it was the maximum amount the carmaker could pay full-time directors without the permission of shareholders.
The company is currently considering its options, Shah said. Contact information for the Slym family wasn’t available.
While the move is a blow to Slym’s family, it also adds to the growing signs of investor activism in India. Maruti Suzuki India Ltd., which delivers about half of the cars sold in the country, earlier this year faced a backlash from minority shareholders after the automaker announced a supply agreement with its Japanese parent.
“This sort of shareholder rejection of executive compensation hasn’t happened at a large company,” said Paras Bothra, vice president for equity research at Ashika Stock Broking Ltd. “There is increased shareholder awareness these days.”
About 30 percent of shareholders rejected the compensation packages -- two other Tata Motors directors had their payouts denied -- after the company saw its passenger-vehicle sales fall more than at any other automaker in the country last fiscal year.
The company, India’s largest carmaker by revenue, would have been unprofitable -- based on standalone standards that exclude earnings from its main Jaguar Land Rover unit -- last fiscal year if it weren’t for the 13.6 billion rupee tax credit it received. Net income ended up being 3.35 billion rupees for the period ended March.
Such financials led Tata Motors to seek approval from shareholders to pay Slym -- who headed the company, except for the Jaguar Land Rover business -- 146.4 million rupees beyond the 4.8 million rupees allowed by law.
Slym, who joined Tata Motors from General Motors Co., died in January after falling from the 22nd floor of the Shangri-La hotel in Bangkok, in a case that Thai police have said pointed to suicide.
Aside from Slym, the other executive directors who had their pay rejected were Ravindra Pisharody, who headed the trucks unit, and Satish Borwankar, who oversaw quality.
While Tata Motors recognizes shareholders’ views, it is necessary to “balance this with recruiting and retaining an industry-proven management team through the long term,” Tata Motors’ Shah said.
“This involves ensuring that the company’s leadership and talent base is appropriately remunerated,” she said. “This is particularly important when the company has ongoing significant turnaround and growth strategies under execution.”