Tata Group, India’s Biggest Commercial Vehicle Manufacturer has announced to offer employee stock option for the first time in 150 years to its top 200 executives while the company is set to enter its next round of turnaround strategy.
This move will mark first of its kind initiative done in an Indian automotive space by a $100 billion company. Three criteria shall be used to assign stock options which shall be based on performance metrics as informed by the company official:
- Gain in market share
- EBIT margin improvement
- Free cash flow as a percentage of revenue
B Balaji, Tata Motors CFO said while addressing the conference,
This is to ring-fence critical talent during the turnaround phase and to match employee payoffs to the long-term gestation period of key initiatives like new product development.
Meanwhile, the company has been pushing in a lot of efforts to become profitable by incorporating measures such as reduction of cost, enhancement of sales and vehicle launches on time. It has also shrunk its losses to Rs 992 crore in FY 2018 as compared to Rs 2,335 crore in fiscal 2017.
Though it is not clear that Tata Group has looked towards implementation of ESOPs like other major companies such as $1.6-billion Tata Chemicals and Indian Hotels Company ( owned by Taj Group), market analyst believe that ESOPs by Tata Motors may be one of the ways of compensating its top management, especially when it is making losses.
A company official told that the firm’s increment and incentive framework has also improved significantly in past few years. And to boost it further, the company is introducing a Long-Term Incentive Plan for the top talent-200 in number which will be subject to the approval of shareholders.