In a move that underlines the high expectations of investors, shareholders of Tata Motors have rejected a proposal for compensation over the prescribed annual limit for three of the automaker’s directors.

The Companies Act caps the compensation limit at ₹48 lakh per annum when a firm posts a loss during a financial year, and higher compensation requires shareholder clearance.

Since, on a standalone basis Tata Motors had posted a loss for the year ended March 31, 2014, shareholders had to approve the compensation packages, which had been approved by the board earlier in the year.

Postal ballot The issue of the directors’ compensation was part of the six special resolutions in a recent postal ballot, the results of which were announced by the company on Wednesday.

Falling short They indicated that Tata Motors did not get the requisite 75 per cent vote to waive recovery of compensation over the prescribed limit from Ravindra Pisharody, Executive Director-Commercial Vehicles; Satish Borwankar, Executive Director - Quality; and the legal heir of the late MD Karl Slym (who died in January) for the 2014 fiscal year. Technically speaking, this would mean that the three directors would have to fork out ₹3.19 crore, ₹2.44 crore and ₹14.64 crore, respectively.

Considering options In a statement, Tata Motors’ spokesperson Minari Shah said: “The company takes cognisance of the shareholders’ views; at the same time, it is necessary to balance this with recruiting and retaining an industry-proven management team through the long-term.

“This involves ensuring that the company’s leadership and talent base is appropriately remunerated, notwithstanding cyclical phases.”

The company is currently considering its options, Shah added.

A resolution to raise the company’s borrowing limit to ₹30,000 crore and other allied resolutions were approved by nearly 99 per cent of the voting shareholders.

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