For the first time in the Tata Group’s history, the chairman of Tata Sons and CEOs of all operating companies will take an estimated 20% cut in compensation as the conglomerate initiates cost-cutting measures. The move is aimed at leading by example, motivating employees and organisations and ensuring business viability, insiders said.
TCS, the group’s flagship and its most profitable company, was the first to announce a cut for CEO Rajesh Gopinathan. Indian Hotels has already said its senior leadership will “contribute a percentage of their salary this quarter to help with the survival phase of the company”.
CEOs and MDs of Tata Steel, Tata Motors, Tata Power, Trent, Tata International, Tata Capital and Voltas, among others, will have their compensation reduced, executives said. Top officials close to the development said the cut would primarily be in current year bonuses.
“These are times never before experienced in the history of our group and it calls for some tough measures to protect businesses,” said a top group CEO seeking anonymity. “We will do all that it takes to ensure right leadership with empathy. As a culture, the group has always ensured employees down the line are protected as much as can be.”
Tata Sons chairman N Chandrasekaran had told earlier that each company will review its HR policy, revenue planning and cash flow management.
Measures in View of Covid Pandemic
“We will be compassionate and each company will take a decision individually to ensure a viable business,” Chandrasekaran had said.
Tata Sons and most group companies did not respond to an email on the subject. A Tata Steel spokesperson said, “Remuneration is a decision which rests with the remuneration committee of the board of Tata Steel. It therefore may not be appropriate to pre-empt a way forward in the matter.”
CEO remuneration at the top 15 Tata Group companies rose about 11% in FY19 from FY18 on average compared with a 14% jump in FY18 over FY17. Barring TCS, no other unit has published the FY20 annual report so far. However, the data is not strictly comparable as some CEOs joined during the financial year.
Chandrasekaran received a total remuneration of Rs 65.52 crore for FY19, which includes a Rs 54 crore commission on the profit of Tata Sons. His package was 19% higher than in FY18.
On the business front, Tata Group sales of 33 listed companies rose 10% to Rs7.52 lakh crore in FY19. Three companies — Tata Motors, Tata Steel and TCS — contributed nearly 82% of total sales. However, profits of the 33 companies declined 20% in FY19 from FY18. TCS contributed nearly Rs32,340 crore to Tata Group profit, followed by Tata Steel at Rs10,218 crore in FY19.
TCS chief executive Rajesh Gopinathan’s remuneration dropped 16.5% to Rs13.3 crore in the fiscal year ended March 31from Rs 16.04 crore in the previous financial year.
“The executive remuneration for FY20 is lower than FY19 in view of the economic conditions impacted by the Covid-19 pandemic,” said the TCS annual report. He earned 215 times the median remuneration. Tata Motors CEO Guenter Butschek was paid Rs26.29 crore, the most among group CEOs and 351 times the median remuneration.
The company made a loss of Rs28,828 crore in FY19. Tata Steel, which reported a 16% compounded sales growth over three years and 88% profit growth during the period, raised CEO TV Narendran’s salary by 19% to Rs11.23 crore in FY19. Titan and Tata Elxsi, the two best companies as far as growth was concerned, raised CEO remuneration by 15% each in FY19. The CEO pay package at Trent, Tata Chemicals, Rallis India and Tata Coffee rose about 10% in FY19.
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