Total Rewards Quarterly

Profit Sharing Leading to Wealth Creation

The Total Rewards Philosophy

The Total Rewards Philosophy at Vedanta Resources encompasses various facets of monetary and non-monetary rewards. Every element of the rewards architecture is backed by short or long-term performance aligned to the business deliverables. The Rewards model not only focuses to attract and retain the right talent but also ensures that the employees stay motivated in their roles thereby making greater contributions towards achieving the common goal of the organization.

Total Rewards Philosophy and Compensation Mix

The executive compensation at Vedanta boasts of an equal proportion of short, medium and long-term rewards. Under this approach, the organization incentivizes the executives to achieve specific, pre-determined goals during the financial year thereby encouraging and rewarding strong performance. This creates a better alignment between the interest of shareholders and wealth generation of executives. The Rewards model portfolio is designed such that at junior management levels, the compensation structure is heavier on fixed components whereas at senior leadership levels, the compensation portfolio is a balanced mix of fixed pay, annual bonus and long-term incentives.

Employee Stock Option Scheme – A Unique Proposition

Vedanta has always endeavored to be the frontrunners in building a comprehensive Employee Value Proposition, and the Employee Stock Options scheme is one such ‘distinguished feature’ in the overall Rewards framework at Vedanta. The Stock Option scheme is a minimal cost vesting scheme where the employees are allotted stock options with a specified lock-in period. The vesting of such options is linked with the company’s performance against the pre-determined peer companies. The scheme was introduced with the following objectives:

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The organization incentivizes the executives to achieve specific, pre-determined goals during the financial year thereby encouraging and rewarding strong performance. This creates a better alignment between the interest of shareholders and wealth generation of executives
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Tom Albanese, Chief Executive Officer, Vedanta Resources Plc.
  • To make the employees the owners of the company The leadership at Vedanta very strongly believes in the concept of entrepreneurship. They are confident that the level of involvement and commitment of an entrepreneur or the owner of a business is far more than that of any stakeholder. This confidence translated in the form of Employee Stock Option Scheme.

  • Profit sharing leading to creation of wealth for the employees With the belief – employees as its core strength, Vedanta is a frontrunner when it comes to sharing profit with its employees. The idea of wealth creation for its employee sprouted in early 2000s and crystalized in the form of Employee Stock Option Scheme. It has always been a part of the long-term strategy of the organization since its inception in the overall rewards framework. Tom Albanese, Chief Executive Officer, Vedanta Resources Plc. said “For any company, large or small, better employee performance and productivity goes hand in hand with an engaged workforce and a rewards system which has a line of sight between performance and commensurate reward. Performance criteria also need to be aligned, so they link to the Corporate and Board objectives, with cascading KPIs, which are fit for purpose for each respective role.” The scheme changed many forms during this journey from a fixed TSR-based long-term stock option scheme to a tenure-based company performance-driven scheme; from a fixed term vesting to a staggered year-on-year vesting, the scheme underwent many more such modifications. The current scheme titled ‘Performance Share Plan’ is an evolved scheme with an amalgamation of many developments in the past and serving the best interest of the employees and also of the organization. 

Few of the distinguished features of the ‘Performance Share Plan’ as applicable in Vedanta are:

  • One Vision, One Vedanta – Geographical Spread Vedanta Resources is a London-listed natural resource major with global operations. The scheme is designed with a view to cater to the laws as applicable in UK and is approved by the remuneration committee for Vedanta Resources Plc. The ‘Performance Share Plan’ is uniformly applicable to employees across all metal, mining and power companies of Vedanta in India and overseas. The stock options that are awarded to the employees across all the countries are of the holding company, Vedanta Resources Plc. which makes them ‘One Team’ striding towards ‘One Goal’.

For any company, large or small, better employee performance and productivity goes hand in hand with an engaged workforce and a rewards system which has a line of sight between performance and commensurate reward
  • Coverage  It may not be wrong to say that Vedanta is one of the first organizations in India to extend the scheme to almost all cadres of the managerial staff. The coverage of employees is a proportion of the overall eligible population in the organization which ensures that all the key and critical talent is covered under the scheme. The applicability of the ‘Performance Share Plan’ initiates at the senior leadership and extends to the fresher engineers/management graduates post completion of one year after confirmation with the organization. More than a retention tool, Vedanta considers this as a driver for sense of ownership. The nomination is strictly based on the defined criteria of performance and potential duly approved by the Business Head/SBU Head. All the nominations are sent to a central committee for building calibration and equity among all the business entities. The entire process is then audited by the assurance team with an eye for process deftness and equity across organizations.

  • Rewarding exceptional talent ‘Performance Share Plan’ aligns with Vedanta’s philosophy of rewarding emerging and exceptional talent. Vedanta has placed various talent identification tools across the group to identify emerging and new leaders in various functions. The talent identified through all such initiatives are covered under the ‘Performance Share Plan’

  • Global organization with Indian roots – Performance conditions Since Vedanta is a global organization with significant operations in India, the comparator basket has been designed such that on Relative Total Shareholder Return performance, 75% weightage is given to the global comparators and 25% weightage is attributed to the Indian comparators. This feature of the scheme appropriately addresses the interests of the global as well as Indian shareholders The Vedanta Group has grown immensely in the last decade from an organization of USD 1 billion to more than USD 12 billion and the Employee Stock Option Scheme has played the role of a ‘Catalyst’ in achieving the milestones of success.

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