Remuneration Policy

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The remuneration policy of the Directors has been designed to keep pace with the business environment and market linked positioning. The Remuneration & Nomination Committee determines and recommends to the Board the compensation payable to Directors. Remuneration for the Executive Directors consists of a fixed component and a variable component linked to the long term vision, medium term goals and annual business plans.

The company had set-up a Remuneration Committee on January 16, 2001 to review and recommend the quantum and payment of annual salary and commission and finalize service agreements and other employment conditions of the Executive Directors. The Committee takes into consideration the best remuneration practices being followed in the industry while fixing appropriate remuneration packages for Directors and to administer and superintend the Long Term Incentive Plans such as ESOPs, RSUs etc. Accordingly, during the financial year ending March 31, 2013, the nomenclature of the said committee was changed to Remuneration and Compensation Committee. Further to that, as per the guidelines of Companies Act 2013, the committee has been renamed as the Nomination and Remuneration Committee.

As on March 31, 2014, the committee has three Non-Executive and Independent Directors as its members in accordance with the prescribed guidelines. General (Retd) V.P. Malik is the Chairman of the Committee and Mr. Pradeep Dinodia and Mr. Ravi Nath are the other members. Mr. Surender Chhabra, VP Finance, acts as the Secretary of the Committee.

"Board of Directors" or "Board", in relation to a company, means the collective body of the Directors of the company;

The expression "senior management" means personnel of the company who are members of its core management team other than the Board of Directors. It comprises of all members of the management who are one level below the Executive Directors and include the Functional Heads.

"Key managerial personnel", in relation to a company, means-

• the Chief Executive Officer or the Managing Director or the Manager;
• the Company Secretary;
• the Whole-time Director;
• the Chief Financial Officer; and
• such other officers as may be prescribed;

Hero MotoCorp Limited has the following individuals assuming key positions in the company:

• Board of Directors
  • Mr. Brijmoham Lall Munjal (Chairman)
  • Mr. Pawan Munjal (Managing Director and CEO)
  • Mr. Sunil Kant Munjal (Joint Managing Director)
  • Mr. M. Damodaran (Non-Executive and Independent Director)
  • Mr. Pritam Singh (Non-Executive and Independent Director)
  • Mr. Ravi Nath (Non-Executive and Independent Director)
  • Mr. Pradeep Dinodia (Non-Executive and Independent Director)
  • Gen. (Retd.) V.P. Malik (Non-Executive and Independent Director)
  • Mr. Sumant Kant Munjal (Non-Executive Director)
  • Mr. Paul Edgerley (Non-Executive Director)
  • Dr. Anand C. Burman (Non-Executive and Independent Director)
• Independent Directors

  Pursuant to Clause 49 of the Listing Agreement entered into with the Stock Exchange(s), an Independent Director means a Non-Executive Director who:

  • Apart from receiving Director’s remuneration, does not have any material pecuniary relationships or transactions with the company, its promoters, its Directors, its Senior Management, its holding company, its subsidiaries or associates which may affect independence of the Director;
  • Is not related to promoters or persons occupying management positions at the Board level or at one level below the Board;
  • Has not been an executive of the company in the immediately preceding 3 (three) financial years;
  • Is not a partner or an executive of the statutory audit firm or the internal audit firm that is associated with the company and has not been a partner or an executive of any such firm for the last 3 (three) years and the legal firm(s) and consulting firm(s) that have a material association with the entity;
  • Is not a material supplier, service provider or customer or a lesser or lessee of the company, which may affect independence of the Director;
  • Is not a substantial shareholder of the company i.e. owning 2 (two) % or more of the block of voting shares; and

  • Is not less than 21 (twenty one) years of age

  As on March 31, 2013, the company’s Board comprised of 11 (eleven) Directors. Of the 11 (eleven) Directors, 3 (three) Directors including the Chairman are Executive Directors, 2 (two) are Non-Executive Directors and 6 (six) are NonExecutive and Independent Directors. More than 50% of the Board consists of Independent Directors, in consonance with Clause 49 of the Listing Agreement.

• The senior management team consists of
  • Chief Financial Officer
  • Head – Sales & Marketing
  • Head – Operations and Supply Chain
  • Head – Strategic Sourcing and Supply Chain
  • Chief Information Officer & Information Systems Head
  • Head – HRM
  • Head – Strategy and Performance Transformation
  • Head – R&D
  • Head – International Business
  • Head – Parts Business
• Key Managerial Personnel
  • Chairman
  • Managing Director and CEO
  • Joint Managing Director
  • Chief Financial Officer
  • Legal Head and Company Secretary

Refer to the document on 'Nomination & Remuneration Committee (N&RC) Charter' issued separately.

While designing compensation for Directors, Key managerial personnel, senior management and other employees, the following set of principles act as guiding factors:

• Aligning key executive and board remuneration with the longer term interests of the company and its shareholders
• Minimize complexity and ensure transparency.
• Link to long term strategy as well as annual business performance of the company
• Promotes a culture of meritocracy and is linked to key performance and business drivers.
• Reflective of line expertise, market competitiveness so as to attract the best talent.

The remuneration paid to Executive Directors is recommended by the Nomination and Remuneration Committee and approved by the Board in the Board meeting, subject to the subsequent approval by the shareholders at the general meeting and such other authorities, as the case may be.

At the Board meeting, only the Non-Executive and Independent Directors participate in approving the remuneration paid to the Executive Directors. The remuneration is arrived by considering various factors such as qualification, experience, expertise, prevailing remuneration in the industry and the financial position of the company. The elements of the remuneration and limits are pursuant to the clause 178, 197 and Section V of the Companies Act 2013 and also Clause 49 of the Listing Agreement entered into with the Stock Exchange(s).

The remuneration structure for the Executive Directors would include the following components:

• Provides for a fixed, per month, base level remuneration to reflect the scale and dynamics of business to be competitive in the external market
• Are normally set in the home currency of the Executive Director and reviewed annually
• Will be subject to an annual increase as per recommendations of the Nomination and Remuneration committee and approval of the Board of Directors.

• Executive Directors will be allowed remuneration, by way of commission which is in addition to the Basic Salary, Perquisites and any other Allowances, benefits and amenities.
• Subject to the condition that the amount of commission shall not exceed 1% of net profit of the company in a particular financial year in the manner referred in Section 197 & 198 of Companies Act 2013.
• The amount of commission shall be paid subject to recommendation of the Nomination and Remuneration committee and approval of the Board of Directors.

A basket of Perquisites and Allowances would also form a part of the remuneration structure.

In addition to the above, the remuneration would also include:

• Contribution to Provident and Superannuation Funds
• Gratuity

If in any financial year during the tenure of the Executive Directors, the company has no profits or its profits are inadequate, they shall be entitled to, by way of Basic Salary, Perquisites, allowances, not exceeding the ceiling limit of 2,00,000 per month, and in addition hereto,they shall also be eligible for perquisites not exceeding the limits specified under Part IV of Schedule V of the Companies Act, 2013 or other such limits as prescribes by the overnment from time to time as Minimum Remuneration, whichever is higher.

The Non-Executive Directors of the company would be paid sitting fees of INR 1,00,000 for each meeting of the Committees and Board.

The Non-Executive and Independent Directors are also entitled to remuneration by way of commission aggregating up to 0.10 % of net profit of the company pursuant to the provisions of sections 197,198 of the Companies Act 2013 in addition to the sitting fees for attending the meetings of the Board and any Committee thereof.

The Remuneration to the Non Executive Directors would be as per recommendations of the Nomination and Remuneration committee and approval of the Board of Directors. It would be pursuant to the provisions of sections 197,198 of the Companies Act 2013.

The compensation for the Key managerial personnel, senior management and staff at Hero MotoCorp would be guided by the external competitiveness and internal parity through annual benchmarking surveys.

Internally, performance ratings of all Hero MotoCorp Employees would be spread across a normal distribution curve. The rating obtained by an employee will be used as an input to determine Variable and Merit Pay increases. Variable and Merit pay increases will be calculated using a combination of individual performance and organizational performance. Grade wise differentiation in the ratio of variable and fixed pay as well as in increment percentage must be made.

Compensation can also be determined based on identified skill sets critical to success of Hero MotoCorp. It is determined as per management’s review of market demand and supply.

Employees are assigned grades according to their qualifications and work experience, competencies as well as their roles and responsibilities in our organization. Individual remuneration is determined within the appropriate grade and is based on following:

• An individual’s experience, skill, competencies and knowledge relevant to the job; and
• An individual’s performance and potential contribution to the company.

Employee Group	Parameters to Focus (Compensation Mix)
Leadership	High weightage to company performance & Emphasis to Long term incentives and benefits
Middle management	High weightage to individual performance & lesser variable component.
Staff	No Variable, Fixed Income & some social security
Workman	No Variable, Fixed Income. Better then industry pay. Focus on providing necessary and statutory benefits

Workmen are paid wages in accordance to the settlement with the recognized union of the workers as per best industry practice, as applicable. Where there is no union, workmen wages are as per the best industry practice and applicable law. All our remuneration components should be in accordance with applicable statutory compliances.

With the objective of building a high performance culture at Hero MotoCorp, PACE – Performance, Appreciation & Competency Evaluation, a new PMS system has been introduced. This system also ensures the following:

• Align organizational and individual Goals (KRA)
• Provide data for making critical decisions related to the employees
• Drive the right employee behaviors
• Support employee development

The goals are derived from the company’s long term vision which is translated to medium term plans and then an Annual Business Plan.

These goals are cascaded to the functional heads and from them, to their reporting managers. This process is carried on right up to the lower levels. In this manner, the company’s annual business goals are cascaded to the lower levels of the organization. Similarly, the senior management’s performance is also contingent on their leadership, guidance and also the achievement of the goals of their teams.

The employees are rated on the basis of achievements of these goals and also a defined competency framework. The weightages of these depend on the level within the organization.