Page 287 - DCOM404_CORPORATE_LEGAL_FRAMEWORK

Corporate Legal Framework

team. Understandably, individual performance had a higher weightage than team
performance. That apart, there were peer incentives for team and individual performances.
These rewarded performance in kind – a paid holiday, gift vouchers, or gifts.

Since the concept of variable pay was new to Care Soft, it had decided to implement it at
only the senior and middle management levels, apart from shopfloor workers, leaving
out the junior management. The senior management – starting from a general manager to
the CEO – had a variable component ranging from 15-40 per cent. Those below had just
5-15 per cent in variable pay.
Mathur, as a brand manager, came in at the general manager level. And last year had been
particularly bad for the toothbrush division he headed. Volume sales had dropped by
5 per cent, and rupee sales by 15 per cent because of price cuts, promotions, and discounts.
Besides, a new toothbrush that had been slated for launch in the second half of last year
hadn't been launched. This was a low-end brush that was expected to rake in 1 crore in
sales.

Fiscal 2001-02 was the first full year of variable pay, and Arora could tell that the executives
weren't happy with it. Already, a VP and another general manager had made their
displeasure known to Arora. Mathur leaving would not only encourage the other two to
follow suit, but also impact the new pay plan.
"My performance targets were unreal," continued Mathur. "Show me one company that
has increased its toothbrush sales and I'll walk out of this room and never complain."
"True," said Arora. "But look at it from the organisation's point of view. There are other
units that have taken a hit, with the result that our sales for last year were down. We've
tried to do the best under the circumstances."
"Probably, but why penalise me for somebody else's fault," Mathur complained.

"I don't understand."
"I am referring to the new toothbrush that my team was supposed to launch in the second
half of last year," Mathur explained. "We couldn't introduce it because the design team sat
on it for a long time, and then the engineering team took its own sweet time bringing it
into production. By the time we were ready to go, we realised that the launch expense
wouldn't be worth it. The variable component in my compensation is 20 per cent and it's
been a double-whammy for me. The fact that we didn't meet our targets ensured zero-
increase in my incentives, and the increase in base pay doesn't even beat the rate of
inflation."
"Anil, don't forget that most of us in Care Soft are in the same boat. That said, I do think we
have an issue here. Here's what I can promise: I'll put forth these issues to the compensation
committee. I cannot promise anything else."

Both men looked at the clock on Arora's table. It was well past 10.
"I have to pick up medicines for my son," said Arora. "If I don't find a chemist open now, I'll
be signing my divorce papers tomorrow." Both men laughed and parted.
On Monday, the first thing Arora did was to call his CEO, Rishab Patel, and advise him to
convene a Compensation Committee meeting.
"This week I have a diary so full that a knife wouldn't go through it," the CEO told Arora.
"Do me a favour, Nitin. I'll send out the meeting request, but could you handle it?"
"But how can we decide on anything without you being there?" Arora asked.

Contd...

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