Institutional shareholders vote against re-election of Bharat Forge MD

More than half of Bharat Forge’s institutional shareholders voted against reappointing BN Kalyani as the company’s managing director (MD) last week, The Economic Times reported on Tuesday. 53.51 percent of institutional investors voted against the resolution, while 46.49 percent voted in favor, according to voting results published on the BSE.

However, Kalyani will remain the managing director of the company as the special resolution was passed with the support of the majority of the promoting group. A special resolution requires the support of shareholders holding at least 75 percent of the share capital. Overall, 75.45 percent of shareholders voted in favor of the proposal, while 24.55 percent voted against.

Bharat Forge got shareholder nod for reappointment of BN Kalyani as MD and GK Agarwal as Deputy MD for five years on August 9, 2018.

Institutional investors including foreign and domestic funds hold 43.87% stake in Bharat Forge as of March 31, 2023 while developers hold 45.26%. Retail investors held about 11 percent of the company.

Proxy advisory firms like Institutional Investors Advisory Services (IiAS) and Stakeholders Empowerment Services (SES) had recommended that investors vote against the special resolution to appoint Kalyani as managing director, citing his excessive remuneration.

IiAS had stated that Kalyani’s total salary package in FY23 was around Rs 21.26 crore, with the fixed component constituting 85 per cent. In FY24, his remuneration is around Rs 28.67 crore, of which 79 per cent constitutes the fixed part.

The fixed portion of their compensation increased from around 40.9% in fiscal year 2019 to 82.5% in fiscal year 2022, and the variable component decreased from 59% in fiscal year 2018 to 17% of total compensation in fiscal year 22, Iias said. “We believe that a significant portion of executive pay should be variable and tied to company performance,” said IiAS.

SES said that Bharat Forge should disclose information on individual limits for fixed and variable pay. “In the present case, the company has not disclosed the absolute cap of the variable remuneration. The commission paid to BN Kalyani is almost 2.5 times the next highest paid commission to the CEO. In addition, the commission paid to him for FY22 is nearly equal to the total commission paid to the company’s four non-promoter CEOs,” SES said.