Update on Director’s Remuneration - Amazon Web Servicescorp-content.tatamotors.com.s3-ap-southeast-1.amazonaws.com/wp... · along with some exposure to complex restructuring ...

Update on Director’s Remuneration

Table of Contents

Background for the Appointment of MD & CEO

Brief Profile of the new MD & CEO

Remuneration Proposed for MD & CEO

Remuneration Proposed for ED (Commercial Vehicles)

Remuneration Proposed for ED (Quality)

Transformation Journey

2

Background for the Appointment of MD & CEO

Over the last couple of years, the Company is going through a set of unprecedented

circumstances i.e. sustained industry wide lower demand, heightened competitive pressures from

global OEM’s, flux in regulatory environment, drop in profitability & productivity and a sudden

demise of the Managing Director.

The Company is in the midst of an organizational transformational initiatives in response to the

above. Given these challenges and strategic priorities, a search was undertaken on a global basis

and multiple candidates were interviewed for the CEO & Managing Director’s role.

The Company was looking for an outstanding organizational level leader, who could provide

strategic direction and create suitable execution framework to ensure the organization’s success,

both for short term and long term basis. Executives with large scale global automotive experience

along with some exposure to complex restructuring/turnaround programs and cultural

transformation initiatives were considered.

After interviewing of multiple Executives with large scale global automotive experience along with

some exposure to complex restructuring/ turnaround programs and cultural transformation

initiatives, Mr. Guenter Karl Butschek had been identified.

3

Why Guenter Karl Butschek ?................Brief Profile

During his stint as as President and Chief Executive Officer of Netherlands Car B.V., a contract

manufacturer within the global manufacturing network of DaimlerChrysler and Mitsubishi Motors

Corporation, he successfully managed the restructuring of processes and a turnaroundprogram with significant improvements in performance, quality, and productivity

Mr. Butschek, aged 55, graduated in Business Administration and Economics with a diploma from

the University of Cooperative Education Stuttgart, Germany

Prior to Airbus, Mr. Butschek worked at Daimler AG for more than 25 years in international

automotive management, leading functions like production, industrialization and procurement. The

last role he held was President and Chief Executive Officer of Beijing Benz Automotive Co. Ltd. in

China (a joint venture between Daimler AG and Beijing Automotive Industrial Holding)

Mr. Butschek’s last assignment was with Airbus Group where he served as the Chief Operating

Officer and Member of the Group Executive Committee responsible for its global operations

leading a team of 42,000 employees spread across 20 locations (engineering centres, production

plants) in 8 countries/ geographies and a global supplier network.

Mr Butschek reshaped the industrial strategy, empowered operational units, implemented aglobal operating system and enhanced the end-to-end supply chain performance in orderto master the rate increases, launch of new aircraft types and to structurally improveproductivity and flexibility

4

Remuneration proposed for MD & CEO

Taking into consideration the size and complexity of the Company’s global operations, the enormous

responsibility for oversight of the Tata Motors’ Group (excluding Jaguar Land Rover business) and the

qualifications and accomplishments of Mr Butschek and based on the recommendation of the Nomination and

Remuneration Committee, the Board of Directors (the “Board”), at its meeting held on January 18, 2016

appointed Mr Butschek as Managing Director and CEO of Tata Motors’ Group (excluding Jaguar Land Rover

business) for a tenor of 5 years with effect from 15th February 2016. The remuneration proposed is as below :-

Basic Salary: €27,500 per month;

Benefits, Perquisites and Allowances:

i. Living allowance of €110,000 per month, a one-time cost for his relocation from Toulouse, France to Mumbai will be borne by the Company.

ii. Rent-free residential accommodation (furnished or otherwise).

iii. Reimbursement of hospitalization and major medical expenses incurred as per Rules of the Company. This includes Medical Insurance premium.

iv. Two Company maintained cars with drivers as per Company policy. v. Telecommunication facility as per Rules of the Company

vi Other perquisites and allowances given below: -

a. Medical Insurance Plan with global cover for self and spouse.

b. Business Class travel, four times a year for self and spouse to Austria.

c. Personal Accident Insurance Premium.

d. Premium towards policy for compensating loss of life.

e. Annual club membership fees

5

Remuneration proposed for MD & CEO

vii Retirement benefits will be limited to contributions to Provident Fund and Gratuity only as per the Rules of the Company.

viii Additional payment of €204,000 per annum in lieu of loss of pension in home country. This payment will be made after adjusting for contributions made towards

elements of pension in India, listed in (vii) above.

ix Leave entitlement is as per the policy of the Company.

Incentive Remuneration in the form of: -

i ) Performance Linked Bonus: The target performance linked bonus will be €550,000 per annum upto a maximum of €825,000 per annum.

ii) Long Term Incentive: The value of the long term incentive plan is intended to be a target of €550,000 per annum but not exceeding €825,000 per annum. No amount would be payable if termination of the agreement is initiated by the Managing Director prior to completion of the term.

One time Joining Bonus: €250,000 payable in the first month of joining.

The above remuneration would be paid in Rupee equivalent according to the prevalent Euro/INR rate at the time of each payment and would be subject to

deduction of all applicable taxes at source. All applicable taxes would be payable by and to the account of Mr Butschek, except for housing, car perquisites and travel expenses to home country mentioned in (b)(ii), (b)(iv) and (b)(vi)(b) above, respectively.

Minimum Remuneration: Notwithstanding anything to the contrary herein contained, where in any financial year during the currency of the term of the Managing

Director, the Company has no profits or its profits are inadequate, the Company will pay to the Managing Director remuneration by way of Basic Salary, Benefits,

Perquisites and Allowances, Incentive Remuneration and retirement benefits as specified above.

6

Benchmarking of the Remuneration Profile with the Industry

Remuneration of Mr Butschek is commensurate with the remuneration of expatriates appointed at

CEO/MD levels of similar sized multinationals taking into consideration the responsibilities

shouldered by him. Mr. Butschek’s remuneration is based on his past remuneration and has been

subjected to peer level benchmarks for global automotive OEMs as per survey conducted by Aon

Hewitt, an independent consultant. The table below illustrates the requisite comparative data of the

CEO remuneration in the global industry:

(Rupees in crores)

Exchange rate:1 Euro = INR 70.467

(Data Source : Aon Hewitt Compensation Study, Positions of Business Heads (comparable to Tata Motors excluding JLR) who are

Direct reports to the CEO for global automotive OEM’s.)

Note: A percentile is a measure used in statistics, indicating the value under which a given percentage of observations in a group of

observations fall. For example, the 25th percentile is the value (or score) under which 25% of the observations may be found.

Based from the above data it may be observed that the remuneration decided for Mr Butschek (in the

range of INR 28-29 crores per annum at the above Euro/INR exchange rate) is comparable with global

auto OEMs ( i.e between 10th and 25th percentile) and is commensurate with the said benchmarks taking

into consideration the responsibilities being shouldered by him.

10th percentile 25th percentile Median 75th percentile 90th percentile

21.52 29.13 34.50 51.87 62.09

7

Please refer to the Section –”Summary of Proposals Under item no’s 5 to 6 of the Notice” in the TML Annual Report 2015-16 (Page 46 & 47) for further details on the above and the approvals sought

from the Shareholders.

Additional Responsibilities of MD & CEO

In addition to Tata Motors India business, Mr Butschek is also responsible for all other domestic and

offshore subsidiaries, Joint Ventures and Associates of Tata Motors Ltd (except Jaguar Land Rover)

Details of key subsidiaries ,Joint ventures and Associates are given below :-

� Tata Motors Finance Ltd

� Tata Technologies Ltd

� TML Drivelines Ltd

� Tata Marcopolo Motors Ltd

� TML Distribution Company Ltd

� Concorde Motors(India) Ltd

� Tata Cummins Private Ltd (JV)

� Fiat India Automobiles Private Ltd

(JV)

� Automobile Corporation of Goa Ltd

(Associates)

� Tata Hitachi Construction Machinery

Company Private Ltd (Associates)

� Tata Daewoo Commercial Vehicle

Company Ltd

� Tata Motors (Thailand) Ltd

� Tata Motors (SA) (Proprietary) Ltd

� PT Tata Motors Indonesia

� Tata Motors European Technical

Centre Plc

� Trillix S.r.l

� Nita Company Ltd, Bangladesh

(Associates)

Domestic Subsidiaries/JVs/Associates* Offshore Subsidiaries/JVs/Associates

• There are other small domestic subsidiaries which

are not included in the above list.

Tata Motors Ltd or its subsidiaries, joint ventures or associates does not additionally compensate

him in any manner for the activities performed by him in relation to those companies.

8

Remuneration proposed for ED(Commercial Vehicles)-Mr Ravi Pisharody

Background :-

� Mr Ravi Pisharody is the Executive Director (Commercial Vehicles) since June 21, 2012. He joined the

Company in 2007 as Vice President, Sales and Marketing. He is responsible for the Commercial Vehicle

Business Unit of the Company involving product design and development, manufacturing, sales and

marketing functions.

� Since the time he took over as the Head of Commercial Vehicles, he has held the business strong in the

midst of intensifying competition in every product segment. Before joining the Company, he worked with

Castrol Ltd., a subsidiary of British Petroleum and with Philips India, a subsidiary of the Dutch company in

various roles. Mr Pisharody is an alumnus of IIT, Kharagpur and IIM, Kolkata.

� He actively participates as a Member of National Council of the Confederation of Indian Industry and is

currently the Vice President of Society of Indian Automobile Manufacturers (SIAM).

� Under his able leadership the Company has maintained a strong and innovative product pipeline,pioneered novel customer service initiatives and restructured network management bringing end-to-end accountability. Mr Pisharody has charted out the Company’s long-term strategy for preservingthe Company’s lead position in the commercial vehicle segment in the Indian automobile market andconcurrently increasing market penetration in international markets. His effective leadership coupled

with his multi-industry experience and stellar academic record makes him a valuable resource for the

Company and would be best suited for delivering the vision of the Company

9

Remuneration proposed for ED (Commercial Vehicles)

Basic Salary: Rs 6,00,000/- per month; upto a maximum of Rs10,00,000/- per month. The annual increment which will be eff ective 1st April each year, will be

decided by the Board based on the recommendation of the Nomination and Remuneration Committee (“NRC”) in consonance with individual performance and the

performance of the Company, within the aforementioned maximum basic salary limit. The annual increment that would be eff ective on 1st April every year, would

be limited upto an amount not exceeding 20% of the basic salary as may be decided by the Board in the above manner.

Benefits, Perquisites and Allowances: Details of Benefits, Perquisites and Allowances are as follows:

i. Rent-free residential accommodation (furnished or otherwise) with the Company bearing the cost of repairs, maintenance, society charges and utilities (e.g.

gas, electricity and water charges) for the said accommodation OR House Rent and Maintenance Allowance (in case residential accommodation is not

provided by the Company) of 85% of Basic Salary.

ii. Reimbursement of hospitalisation and major medical expenses incurred as per Rules of the Company (this includes mediclaim insurance premium)

iii. Car facility as per Rules of the Company

iv. Telecommunication facility as per the rules of the Company including broadband, internet and fax

v. Other perquisites and allowances given below subject to a maximum of 55% of Basic Salary, which includes: - Medical allowance - Leave Travel

Concession/Allowance - Other Allowances - Personal Accident Insurance Premium - Annual club membership fees

vi. Retirement benefi ts: Contribution to Provident Fund, Superannuation Fund or Annuity Fund and Gratuity Fund as per the Rules of the Company. Provision of

Special Retirement Benefi ts viz. Pension and Medical Benefi ts upon his superannuation, only if he continues with the Company or any Tata Company till

that time. The Special Retirement Benefi ts are discretionary and can be withdrawn by the Board in case of conviction by the judicial authorities for any off

ences and include clauses on non-compete after superannuation

vii. Leave and encashment of unavailed leave as per the Rules of the Company.

Commission: Such remuneration by way of profit linked commission, in addition to the salary and perquisites and allowances payable, calculated with reference

to the net profits of the Company in a particular financial year, as may be determined by the Board of the Company at the end of each financial year, subject to the

overall ceilings stipulated in Section 197 of the Act, but in any case will not exceed 400% of the said basic salary.

Incentive Remuneration: In case where the net profits of the Company are inadequate for payment of profit-linked commission in any financial year, an

incentive remuneration may be paid upto an amount not exceeding 200% of Basic Salary paid at the discretion of the Board. This incentive remuneration would be

payable subject to the achievement of certain performance criteria and such other parameters as may be considered appropriate from time to time by the Board.

MINIMUM REMUNERATION: Notwithstanding anything to the contrary herein contained, wherein any financial year during the period of 3 years in the currency of

the tenure of the Executive Director, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of basic salary, benefi ts,

perquisites and allowances, incentive remuneration and retirement benefits as specified above.

Proposed remuneration would be within the scheduled limits under Schedule V of the Companies Act10

Benchmarking of the Remuneration of Mr Pisharody with the Industry

Total Remuneration paid/payable to Mr Pisharody, is commensurate with industry standards and

Board level positions held in similar sized domestic companies (i.e below 10th percentile),

taking into consideration the responsibilities shouldered by him. The table below illustrates the

requisite comparative data:

(Rupees in crores)

(Data Source : Aon Hewitt Compensation Study, Positions of Business Heads (with P&L responsibility) in companies with Revenues in

excess of R10,000 crores in FY 2015-16. The value represented above refers to Cost to Company, which includes basic salary, all

allowances benefi ts valuations, performance bonuses / commissions and Long term incentives.)




6.7 7.9 9.25 11.41 14.45

11

Please refer to the Section –”Summary of Proposals Under item no’s 7 of the Notice” in the TML Annual Report 2015-16 (Page 48,49 & 50) for further details on the above and the approvals sought


Remuneration is lower within 10th percentile on account of lower variable pay on account of the muted

performance of the company as reflected in the standalone financials

Remuneration proposed for ED (Quality)-Mr Satish Borwankar

Background :-

� Mr Borwankar is the Executive Director (Quality) since June 21, 2012 and is responsible for the quality

function for the Company for both commercial and passenger vehicles.

� Having started his career with the Company in 1974, as a Graduate Engineer Trainee, he has worked in

various executive positions, for overseeing and implementing product development, manufacturing

operations and quality control initiatives of the commercial vehicle business unit of the Company. He has

played a significant role in setting up Greenfield projects of the Company.

� He also shoulders responsibility for reviewing and overseeing the implementation of Safety, Health and

Environment related practices of the Company and the Tata Business Excellence Model (TBEM) guidelines.

� The Company’s future strategy emphasises upon Quality excellence as an important pillar for achieving its

Vision

� As a Director, nominated on the Board of certain subsidiary companies, he provides valued direction and

insight. Also “Sankalp” a suppliers’ improvement project, mentored by him, is expected to transform the

Company’s supplier quality standards. It is worthy to note that, the Company or these subsidiaries do not

additionally compensate him, in any manner, for these additional activities undertaken by him.

12

Remuneration proposed for ED (Quality)

Basic Salary: Rs 4,75,000/- per month; upto a maximum of Rs7,00,000/- per month. The annual increment which will be eff ective 1st April each year, will be

decided by the Board based on the recommendation of the Nomination and Remuneration Committee (“NRC”) in consonance with individual performance and the

performance of the Company, within the aforementioned maximum basic salary limit. The annual increment that would be eff ective on 1st April every year, would

be limited upto an amount not exceeding 20% of the basic salary as may be decided by the Board in the above manner.

Benefits, Perquisites and Allowances: Details of Benefits, Perquisites and Allowances are as follows:

i. Rent-free residential accommodation (furnished or otherwise) with the Company bearing the cost of repairs, maintenance, society charges and utilities (e.g.

gas, electricity and water charges) for the said accommodation OR House Rent and Maintenance Allowance (in case residential accommodation is not

provided by the Company) of 85% of Basic Salary.

ii. Reimbursement of hospitalisation and major medical expenses incurred as per Rules of the Company (this includes mediclaim insurance premium)

iii. Car facility as per Rules of the Company

iv. Telecommunication facility as per the rules of the Company including broadband, internet and fax

v. Other perquisites and allowances given below subject to a maximum of 55% of Basic Salary, which includes: - Medical allowance - Leave Travel

Concession/Allowance - Other Allowances - Personal Accident Insurance Premium - Annual club membership fees

vi. Retirement benefits: Contribution to Provident Fund, Superannuation Fund or Annuity Fund and Gratuity Fund as per the Rules of the Company. Provision of

Special Retirement Benefi ts viz. Pension and Medical Benefits upon his superannuation, only if he continues with the Company or any Tata Company till that

time. The Special Retirement Benefits are discretionary and can be withdrawn by the Board in case of conviction by the judicial authorities for any offences

and include clauses on non-compete after superannuation

vii. Leave and encashment of unavailed leave as per the Rules of the Company.

Commission: Such remuneration by way of profit linked commission, in addition to the salary and perquisites and allowances payable, calculated with reference

to the net profits of the Company in a particular financial year, as may be determined by the Board of the Company at the end of each financial year, subject to the

overall ceilings stipulated in Section 197 of the Act, but in any case will not exceed 400% of the said basic salary.

Incentive Remuneration: In case where the net profits of the Company are inadequate for payment of profit-linked commission in any financial year, an

incentive remuneration may be paid upto an amount not exceeding 200% of Basic Salary paid at the discretion of the Board. This incentive remuneration would be

payable subject to the achievement of certain performance criteria and such other parameters as may be considered appropriate from time to time by the Board.

MINIMUM REMUNERATION: Notwithstanding anything to the contrary herein contained, wherein any financial year during the currency of the tenure of the

Executive Director, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of basic salary, benefits, perquisites and

allowances, incentive remuneration and retirement benefits as specified above.

Proposed remuneration would be within the scheduled limits under Schedule V of the Companies Act13

Benchmarking of the Remuneration of Mr Borwankar with the Industry

Total Remuneration paid/payable to Mr Borwankar, is commensurate with industry standards

and Board level positions held in similar sized domestic companies (i.e below 10th

percentile), taking into consideration the responsibilities shouldered by him. The table below

illustrates the requisite comparative data:

(Rupees in crores)

(Data Source : Aon Hewitt Compensation Study, Positions of Business Heads (with functional responsibility) in companies with Revenues in

excess of R10,000 crores in FY 2015-16. The value represented above refers to Cost to Company, which includes basic salary, all

allowances benefi ts valuations, performance bonuses / commissions and Long term incentives.)




2.98 3.59 3.75 5.23 6.93

14

Please refer to the Section –”Summary of Proposals Under item no’s 8 of the Notice” in the TML Annual Report 2015-16 (Page 48,49 & 50) for further details on the above and the approvals sought


Remuneration is lower within 10th percentile on account of lower variable pay on account of the muted

performance of the company as reflected in the standalone financials.

Transformation Journey under the new leadership

•Comprehensive exercise underway to develop the brand purpose and positioning of Tata motors as a brand

Enhancing the Brand Perception of

Tata Motors

•Multiple Initiatives have been identified from pre sales stage to after sales to deliver high Customer SatisfactionUnique and Delightful Customer experience

• Initiatives under this focusses on benchmarking with world class new product development processesExcellence in delivery of New Products

• Initiatives underway to deliver high quality products by improving internal processes and supplier processes

Reliable and High quality products with focus on World Class Quality (WCQ)

processes

•Focus on improving productivity performance and reduce manufacturing related costs and yield improvementWorld Class Manufacturing (WCM)

•Focus to improve the supply-chain processes like Material Requirement planning, rationalizing the supplier base for agility, strengthen relationship with strategic suppliers

Agile and Cost-effective Supply Chain

•Several initiatives underway addressing each and every cost element for cost competitiveness with clear targets in all the cost areasCost Competitiveness

• Initiatives underway to drive high-performance culture, improve functional competencies, improve employee engagement and build a pipeline of talented workforce

People processes and Organization structure

The Company, under the leadership of Mr Butschek and Senior Management, will be drawing on the 8 pillars of

transformation initiatives under the following categories for setting the agenda and targets

Sustainable & Profitable Growth

Improved Market Share in all theSegments

Cost efficientOperations

Highly motivated and

engaged team

15

Transformation underway….

Tata Motors Group- Standalone business

Net Revenue and EBITDA excludes other income.

Rs Crores Q4 FY16 Q4 FY15 FY 16 FY 15

Net Revenue 12,570 10,786 42,370 36,302

EBITDA 1,022 299 2,740 (800)

EBITDA % 8.1 2.8 6.5 (2.2)

PBT (before exceptional item) 399 (1,052) 514 (3,571)

PBT 370 (1,156) 150 (3,975)

PAT 465 (1,164) 234 (4,739)

India Business reported a significant improvement in Operating Margin to 6.5 %, which is an improvement of 870 bps Y-o-Y . This broadly reflects :-

� Strong M&HCV growth of 24.3% (Y-o-Y) for FY16

� LCV started showing growth from Q4 FY 16, with a growth of 11.8% (Y-o-Y) in Q4 FY 16

� Exports (of CVs) growth of 16.3% (Y-o-Y) for FY16

� Ongoing cost reduction and other margin improvement initiatives

16

Tata Motors

Thank You Please get in touch with us at [email protected] for any queries or clarifications

17

Update on Director’s Remuneration - Amazon Web Servicescorp-content.tatamotors.com.s3-ap-southeast-1.amazonaws.com/wp... · along with some exposure to complex restructuring ...

Documents