[Raghuwire]

Originally Posted by giri1.8

Shares = Asset, salary = cash in hand.

To save his profoundly larger asset, he should have foregone the smaller and meagre salary increase. imagine if eicher goes down in dumps, his significantly larger asset can start melting!!!

[V.Narayan]

I do not know if this was a 10% annual increment over the annual increment he got the year before or was this a 10% increment over a fixed unchanging salary he drew for the just concluded 5 year term. If the latter then a 10% increment isn't unfair.

Though I will say the Nomination & Remuneration Committee did not apply their minds fully on this matter as they should have in a listed company. First increments are being thought through carefully this year given that many companies are reporting a drop in profits versus their March 2020 numbers. When net profit after tax has dropped 26% year on year from Rs 1827 crores to Rs 1347 crores it behooves the NRC to think carefully.

Second it is usually considered prudent to pass two separate AGM resolutions - one on re-appointment and another on the terms of compensation so that even if in the extremely rare chance that the general body does not like the compensation at least the re-appointment of a competent MD won't get derailed. I suppose with almost 50% holding with the family they felt safe. With this special resolution needing 26% to stop it and the negative voters garnering 26.95% i.e. just a whisker above indicates a social media campaign amongst the retail shareholders to get squeak by the threshold.

For those writers who say he earns 340X the wage of his workers I'll defend Lal. What is the ratio of your income versus that of your full time domestic maid or your driver.

Clearly a watershed moment in history of Indian company affairs. I expect he will get re-appointed but with no pay rise.

[giri1.8]

Originally Posted by V.Narayan

For those writers who say he earns 340X the wage of his workers I'll defend Lal. What is the ratio of your income versus that of your full time domestic maid or your driver.

Exactly, someone's value for a company depends on their skill set and how easily they can be replaced without any compromises.

[anjan_c2007]

There's an age old saying in Marathi

"bheek nako pan kutra awaar"

A beggar as the fable goes was asking for alms. A household unleashed a dog to attack this beggar when it is said that he replied with the above phrase. It means "I don't want alms, but don't unleash your dog."

Siddharth Lal was asking for alms and the shareholders unleashed the dog.

[Theyota]

Originally Posted by V.Narayan

For those writers who say he earns 340X the wage of his workers I'll defend Lal. What is the ratio of your income versus that of your full time domestic maid or your driver.

My belief is that salaries in general are a function of demand and supply and not skills.

The maids or any unorganized sector blue collar employees in India are significantly underpaid and from a modern world perspective these salaries are nothing but exploitation. That’s no justification for Siddharth Lal’s hike. He is a person who has misused the privilege of determining his own salary in a publicly listed firm. He deserved the awakening. If he wanted to cash out more at the cost of other share holders, he could have increased his “true” performance linked incentive. Few would have challenged that. Leaders truly have to lead by example.

[SmartCat]

Siddharth Lal probably does not care THAT much about the salary hike.

- Eicher Motors clocked a profit of Rs. 1,300 cr in FY21
- They paid out 33% of that as dividends (Rs. 430 cr)
- Now, the promoter group (Lal & clan) owns 50% of the company. So as a group of individuals, they received Rs. 215 cr as dividends

Now it is unclear how much % Siddharth Lal owns. Since he is the Managing Director and rest are not involved in day to day activities, my guess would be anywhere between 12% to 25% (Rs. 50 cr to Rs. 100 cr as dividends)

[V.Narayan]

Originally Posted by Theyota

That’s no justification for Siddharth Lal’s hike. He is a person who has misused the privilege of determining his own salary in a publicly listed firm. He deserved the awakening. If he wanted to cash out more at the cost of other share holders, he could have increased his “true” performance linked incentive. Few would have challenged that. Leaders truly have to lead by example.

I am using the post of Theyota only as a reference point to share my knowledge of how compensation of CEOs are determined in large listed companies. I sense a some rah-rah on this thread of the glee we all experience when the successful and powerful fall {I am no exception} and a tendency to mix up the fall of a successful CEO with the angst some may have vis-a-vis their own employer/boss. So this is only a knowledge sharing post not one to get into a socialist argument with any one who is cynical.

My two ounces of knowledge comes from having chaired/served on the Nominations & Remuneration Committee of at least two big listed companies - one in India, one in USA.

This committee which decides on the compensation of the MD, all Executive Directors and the bonuses/stock options of the CXOs is always comprised only of independent directors who meet alone without any one from the company to deliberate and decide. Some of us can be cynical and say "oh the independents are in their pocket" but in most well managed companies that is rarely the case today. The liabilities on an independent director are too onerous for most to get 'sold'. The decision to give Lal 10% would have been taken independent of his views. In fact these views are not sought. You look at what has been done in the past, how the company has performed, how competitors have delivered on numbers, increment bands being given to general employees etc and then take a call. The deliberations could extend to three or four sessions. Normally the salary is fixed for 2 or 3 or 5 years. It is not necessarily an annual event of increments. In my own case when I served as an MD by compensation got fixed 5 years at a time. Given that the committee is answerable to the regulator i.e. SEBI, thought is given to what is right and what looks right. And my guess is in Lal's case the compensation is fixed once in 5 years. Whacky compensations are a feature of the USA environment pre-2008. India and Europe have always been more balanced.

The shareholder activists clearly had a point to make and having dealt with organized shareholder activists on a NASDAQ listed company I am cent percent sure there is more to this than meets the eye. And sacking a competent CEO isn't exactly value enhancing for the company, the shareholders, the banks or the customer {i.e. you & I}. And these General Body resolutions are circulated weeks in advance. A mature institutional investor who is not keen on that increment would call up the company and say, "hey I own XX% of the stock, that increment proposed looks out of kilter, please re-think so I don't have to vote against it". That is how you meet the needs of the non-management shareholders and yet not de-stabilize the company. The fact that those who organized this negative vote chose to spring it at the Annual General Meeting smells. So we need to work back as to who benefits with this well orchestrated negative vote. Time will tell.

Having said all this it isn't exactly a bad thing for MD's and Boards in India to be cautioned that they can't take shareholders for granted. This helps in the balance of power equation.

PS: I don't know Lal Junior and I don't own Eicher shares either.

[Theyota]

Originally Posted by V.Narayan

This committee which decides on the compensation of the MD, all Executive Directors and the bonuses/stock options of the CXOs is always comprised only of independent directors who meet alone without any one from the company to deliberate and decide. Some of us can be cynical and say "oh the independents are in their pocket" but in most well managed companies that is rarely the case today. The liabilities on an independent director are too onerous for most to get 'sold'. The decision to give Lal 10% would have been taken independent of his views.

If you look at the constituents of Eicher's board, you can clearly question the in-dependency of the independent directors. All except one are former employees of Eicher group. The one who does not have a history of employment with Eicher group has questionable credentials to hold that responsibility in my opinion. Ideally speaking, you should be 100% correct. But in reality, with a lot companies in India where promoters holding is high, I can't trust independent directors being able to fulfill there duties as they should.

It is not about 10%, it is about the whole sum relative to the performance of the organization. As I read, the people who voted him down are not activist retail investors. It is the institutional investors that voted him down and I am sure they did it with all due diligence.

[sandeepmohan]

Originally Posted by warrioraks

Annual hikes are supposed to be based on last year’s performance.

Originally Posted by Theyota

He is a promoter CEO and not the average employee CEO. If his company is successful, then he is making exponential times more money through his equity in the company.

You are both right.

I am looking at this purely as a change of order seen at RE. His father gave him 2 or 5 of his initial years, to prove he can revive and bring RE to being profitable. He proved he can do it. Lal has repeated that time and again and he isn't just sitting on it. I am talking about a factory that once looked like a glorified tinker shop, where a hammer was the solution to solving all problems. I wonder if they even used a torque wrench for anything. From this to an assembly line that has some level of quality fitting, a proper assembly line, partially robotized engine assembly in sealed chambers, putting together a R&D team in India and abroad and building something completely new. I mean, none of this is easy. Engineers working at RE would have also needed to have a change of mind set. We are no longer building something for our market alone, its for a Global audience and the standards have to be several notches higher.

[am1m]

Originally Posted by sandeepmohan

I am talking about a factory that once looked like a glorified tinker shop...From this to an assembly line that has some level of quality fitting...I mean, none of this is easy.

+1 to that.

I'm no fan of 'rockstar' CEOs and usually am more than delighted when a top exec who gets inordinately high praise in the media gets ousted. And I'm not a big fan of the 'RE brand' either. But in this particular case, even I have to admit this particular head honcho deserves whatever he's being paid. I'm old enough to remember when Bullets were pathetic bikes, the brand wasn't worth anything (except to certain die-hard enthusiasts) and no one in their right mind would buy one in the face of newer (at that time) Japanese bikes. It's pretty obvious that the complete turnaround of the brand's fortunes and crazy profitability have been led by this man. Without him, the brand would probably be dead by now. Back then, I know I certainly didn't expect it to survive beyond the 90s.

[nick.cs]

And he is back. Obviously with again a ballot approval required. This time they'll do their preparation well.

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 upto 3% of profits.

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% of profits as per Section 198 of the Companies Act

Maybe they should have clarified this earlier.

News Link

Link

[Asoon]

2 Crore is nothing for a listed company making profits / paying dividends at scale of Eicher Motors.

I think this is not a good move which will cost a lot to the organisation. Mistrust among key stakeholders will slow down decision making / aggression. With competition attracted towards 300cc+ segment Eicher needs a stable leadership to maintain its dominance.

I was never RE fanboy, RE is perception, if you try to break it down to numbers (Vibration level, Reliability, Fuel Economy, BHP/ CC, NM/ CC ) it starts falling off. RE is very good in story telling/ brand building and is the sole reason they are able to sell bikes which is are headache to maintain in such large numbers. Siddharth Lal was the man behind this perception building.

[Dhillon]

Originally Posted by Asoon

RE is very good in story telling/ brand building and is the sole reason they are able to sell bikes which is are headache to maintain in such large numbers. Siddharth Lal was the man behind this perception building.

I would like to disagree with this statement. The main reason for success of RE has nothing to do with perception building by Siddharth Lal. Yes, RE is good at story telling but that is only after they tasted success with the Classics.

If you go back 10-12 years, people viewed a RE rider as a more macho man. RE were know to be unreliable but with a soul. Add to that the position of gears on the right and brake on the left and back-firing of kick starter. All this made people a little wary of the machine. So when they launched the classic with UC (Unit construction) engine and brakes where they should be, people went mad (including me). Combine all this with a stunning looking motorcycle where you had the option to remove pillion seat and you have got a successful product. Even RE was not expecting such numbers. I remember waiting 7-8 months for my RE 350 Classic post booking with no concrete delivery date back in 2012.
On a side note, if you ask a hardcore RE fan, he will tell you that he still prefers pre 2008 models.

[Asoon]

Originally Posted by Dhillon

I would like to disagree with this statement. The main reason for success of RE has nothing to do with perception building by Siddharth Lal. Yes, RE is good at story telling but that is only after they tasted success with the Classics.

If you go back 10-12 years, people viewed a RE rider as a more macho man. RE were know to be unreliable but with a soul. Add to that the position of gears on the right and brake on the left and back-firing of kick starter. All this made people a little wary of the machine. So when they launched the classic with UC (Unit construction) engine and brakes where they should be, people went mad (including me). Combine all this with a stunning looking motorcycle where you had the option to remove pillion seat and you have got a successful product. Even RE was not expecting such numbers. I remember waiting 7-8 months for my RE 350 Classic post booking with no concrete delivery date back in 2012.
On a side note, if you ask a hardcore RE fan, he will tell you that he still prefers pre 2008 models.

Role of Siddharth Lal on perception building/ brand is debatable,

I totally get you on the second part, most of two wheeler owners in my network are RE owners / super fans. I had multiple arguments with them on why RE question.

RE were know to be unreliable but with a soul

This positioning is perception , this made RE the brand and Eicher motors where it is

[frewper]

Originally Posted by Asoon

Role of Siddharth Lal on perception building/ brand is debatable....

This positioning is perception , this made RE the brand and Eicher motors where it is

Totally disagree. The statement was always true. Its only after the sucess of the classic that they bought this term to the masses. The cult following was sold to the masses which sold the bike in numbers.

Its only that the masses expected the reliabiltiy of a Honda and started complaining even with the smallest problems.

Now i will agree the bike does have a lot of minor stupid problems. And i have faced them all from oil leaks, clutch wire breaks and electrical problems which has left me stranded for days in some remote village.

I still love the brand and the bikes and even after all the crap that I have faced i have still bought the interceptor last month.

If i really wanted reliabilty I would have bought a Honda.

I bought a bike with a soul. Yeah she complains a little and is mercurial. But hey a little bit of wooing and she is cheerful again.