Tata Motors seek govt approval for MD salary of INR 27.24 cr/yr

Tata Motors’ new appointed MD Guenter Butschek was approved by company’s management an annual salary of INR 27.24 crore for 2016-17. This proposed salary is higher than the prescribed limits defined by Section 198 of the Companies Act.

Tata Motors is now seeking approval from the central government to honor the salary proposal in case of inadequacy of profits.

In its annual report, the company stated that, pursuant to the provisions of Section 197 of the Companies Act, the annual remuneration for a single Managing Director or whole time director shall not exceed 5% of the company’s profit calculated as per Section 198 of the Companies Act. It there is more than one such director, the combined remuneration can’t exceed 10% of the profit.

In the last financial year, Tata Motors registered a net profit of INR 234.23 crores on standalone basis but according to Section 198, the company registered loss of 464.05 crores. The performance has improved this year but it’s likely that the company may face the scenario of inadequacy of profits. Hence it seeks approval as a matter of “abundant caution”.

Considering Tata Motors’ effective capital of INR 14,411.75 crores, it would be permitted to pay INR 4.02 crores as annual remuneration for each of its directors if it posts inadequacy of profits. The company stated that the Butschek’s INR 27.24 crore remuneration package is in line with the remuneration of expat CEOs/MDs of similarly sized MNCs.

This article first appeared on Rushlane.com