MANAGEMENT

COMPENSATION
SCHEME AND
DIVIDEND
POLICY

MICHELIN TYRES

SUBMITTEDE BY: DAKSH KAMRA

ROLL NO.: 26
COURSE: BBA (FS&M)
1. INTRODUCTION

When it comes to tires, Michelin stands as an unrivaled icon in the automotive

industry. With over a century of innovation, quality, and performance, Michelin
tires have earned their reputation as some of the finest in the world. In this
comprehensive article, we will delve into the history, technology, and impact
of Michelin tires, shedding light on what makes them the preferred choice for
millions of drivers globally.

Michelin, a French tire manufacturing giant, has a remarkable history that

dates back to 1889. Founded by brothers Édouard and André Michelin, the
company's humble beginnings consisted of a rubber factory in Clermont-
Ferrand, France. However, it didn't take long for the Michelin brothers to realize
the vast potential of rubber in the form of tires.

In 1895, Michelin produced its first removable pneumatic tire, revolutionizing

the industry by making tire replacements significantly more manageable. This
innovation marked the beginning of Michelin's journey toward becoming a
global leader in tire manufacturing. Throughout the 20th century, Michelin
continued to set industry standards with groundbreaking inventions like radial
tires and run-flat technology.

One of Michelin's most significant contributions to the tire industry is the

development of radial tire technology. This innovation, introduced in the 1940s,
replaced the conventional bias-ply tire design. Radial tires offered superior grip,
handling, and durability, revolutionizing the driving experience. They were also
more fuel-efficient, thanks to their reduced rolling resistance.

Michelin is also known for its contributions to run-flat tire technology. These
tires are designed to continue functioning even after a puncture, allowing
drivers to reach a safe location to replace or repair the damaged tire. This
innovation enhances driver safety and convenience, reducing the need for
immediate tire changes on the side of the road.

In the 21st century, Michelin has taken a significant step towards sustainability
by developing green tire technology. This involves using eco-friendly materials
and optimizing tire design for reduced rolling resistance, resulting in lower fuel
consumption and carbon emissions. Michelin's commitment to environmental
responsibility aligns with the global push for greener transportation solutions.

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2. DIVIDEND POLICY

A dividend policy is a policy a company uses to structure its dividend payout.

Put simply, a dividend policy outlines how a company will distribute its
dividends to its shareholders. These structures detail specifics about payouts,
including how often, when, and how much is distributed. There are three
different types of dividend policies—stable, constant, and residual—each with
its own benefits. Dividend policies aren't mandatory, as some companies
choose not to reward shareholders with dividends.

Dividends are a fundamental aspect of investing in stocks, representing a

portion of a company's earnings distributed to its shareholders. These regular
cash payments, typically paid quarterly, serve as a tangible reward for owning
shares in a company. Here, we delve into the significance and mechanics of
dividends in the world of finance.

1. Income Stream: Dividends provide investors with a steady income

stream, making them particularly attractive to income-oriented
investors, such as retirees. These payments can supplement one's
income and contribute to financial stability.

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 2. Financial Health Indicator: A company's ability to pay dividends is
often seen as a sign of its financial health. Consistently paying or
increasing dividends over time indicates that a company is generating
profits and managing its finances effectively.

3. Total Return: When evaluating the return on investment, it's crucial

to consider both capital appreciation (stock price growth) and dividends.
The combined return, known as total return, offers a more
comprehensive view of an investment's performance.

4. Dividend Yield: Dividend yield is calculated by dividing the annual

dividend payment by the stock's current market price. It provides insight
into the income generated by an investment relative to its cost.
Investors often seek stocks with attractive dividend yields.

5. Dividend Reinvestment Plans (DRIPs): Many companies offer

DRIPs, allowing shareholders to reinvest their dividends into additional
shares rather than receiving cash. This strategy can accelerate the
growth of an investment over time.

6. Tax Considerations: Dividends are subject to varying tax rates

depending on the investor's jurisdiction and the type of dividend
(qualified or non-qualified). Understanding the tax implications of
dividends is crucial for effective tax planning.

7. Dividend Policies: Companies have different dividend policies. Some

prioritize high dividend payouts, while others may reinvest more
earnings into the business for growth. Understanding a company's
dividend policy is essential for investors to align their goals with the
company's strategy.

8. Dividend Aristocrats: Some companies have a long history of

consistently increasing their dividends, earning them the title of
"Dividend Aristocrats." These companies often have a strong track
record of financial stability and growth.

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3. MANAGEMENT COMPENSATION SCHEME

Dividends are a fundamental aspect of investing in stocks, representing a

portion of a company's earnings distributed to its shareholders. These regular
cash payments, typically paid quarterly, serve as a tangible reward for owning
shares in a company. Here, we delve into the significance and mechanics of
dividends in the world of finance.

5
 1. Income Stream: Dividends provide investors with a steady income
stream, making them particularly attractive to income-oriented
investors, such as retirees. These payments can supplement one's
income and contribute to financial stability.

2. Financial Health Indicator: A company's ability to pay dividends is

often seen as a sign of its financial health. Consistently paying or
increasing dividends over time indicates that a company is generating
profits and managing its finances effectively.

3. Total Return: When evaluating the return on investment, it's crucial

to consider both capital appreciation (stock price growth) and dividends.
The combined return, known as total return, offers a more
comprehensive view of an investment's performance.

4. Dividend Yield: Dividend yield is calculated by dividing the annual

dividend payment by the stock's current market price. It provides insight
into the income generated by an investment relative to its cost.
Investors often seek stocks with attractive dividend yields.

5. Dividend Reinvestment Plans (DRIPs): Many companies offer

DRIPs, allowing shareholders to reinvest their dividends into additional
shares rather than receiving cash. This strategy can accelerate the
growth of an investment over time.

6. Tax Considerations: Dividends are subject to varying tax rates

depending on the investor's jurisdiction and the type of dividend
(qualified or non-qualified). Understanding the tax implications of
dividends is crucial for effective tax planning.

7. Dividend Policies: Companies have different dividend policies. Some

prioritize high dividend payouts, while others may reinvest more
earnings into the business for growth. Understanding a company's
dividend policy is essential for investors to align their goals with the
company's strategy.

8. Dividend Aristocrats: Some companies have a long history of

consistently increasing their dividends, earning them the title of
"Dividend Aristocrats." These companies often have a strong track
record of financial stability and growth.

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4. MICHELIN MANAGEMENT COMPENSATION

1. asic: This is the foundational component of your salary, and it is a fixed

amount paid annually. It forms the core of your earnings. This is the
foundational component of your salary, constituting 540,000 INR
annually.

2. HRA (House Rent Allowance): HRA is provided to assist employees

in covering their rental housing expenses. The amount can vary based
on the cost of living in the location where you work. HRA is provided at
270,000 INR annually to assist with housing expenses.

3. Bonus: This is an additional payment that can be variable and is

typically linked to your performance or the company's performance. This
is an additional payment of 42,000 INR per annum, often linked to
performance.

4. Wipro Benefits Plan: This likely includes various benefits such as

insurance, medical coverage, and other perks that the company offers
to its employees. This includes benefits like insurance and medical
coverage, amounting to 241,800 INR annually.

5. Additional Allowance: This is an extra amount provided to

employees, which can be used for various purposes based on the
company's policy. An additional allowance of 54,270 INR annually.

6. Provident Fund (Employer Contribution): This is the contribution

made by the employer towards your provident fund, a retirement
savings scheme. The employer contributes 64,800 INR annually to your
provident fund.

7. Gratuity: Gratuity is a lump sum payment given by the employer to

employees as a token of appreciation for their long service or upon
retirement. Gratuity payment of 28,674 INR per annum.

8. Health Benefit (Notional Amount) / ESI (Employee State

Insurance): This could be a notional health benefit amount, or it may
refer to contributions towards the Employee State Insurance scheme,
which provides medical benefits to employees. This could be a notional

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 health benefit amount or contributions to ESI, which is 7,200 INR per
annum.

9. Furniture & Equipment: This might cover expenses related to

providing furniture and equipment for your work, such as a desk, chair,
or other necessary items. Expenses related to furniture and equipment
provided amount to 101,256 INR annually.

10. Variable Pay: Variable pay can vary based on your performance and
the company's performance. It's often linked to achieving specific
targets or goals. Variable pay of 1,350,000 INR annually, likely tied to
performance targets.

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5. CONCLUSION

 Dividend yield: Michelin's current dividend yield is around 8.4%. This is

significantly higher than the average dividend yield for the S&P 500
index, which is around 1.5%.

 Dividend growth: Michelin has a strong track record of dividend growth.

The company has increased its dividend every year for the past 10
years, and the average dividend growth rate over that period has been
around 7%.

 Payout ratio: Michelin's payout ratio is around 69.5%. This is in line with
other companies in its industry, and it indicates that the company is
generating enough cash to cover its dividend payments and still have
money left over to invest in the business.

 Michelin is a global leader in the tire industry, with a strong brand and
a diversified product portfolio. The company is also well-positioned to
benefit from the growth of the electric vehicle market.

 Michelin has a strong financial position, with a healthy balance sheet

and a solid cash flow generation. This gives the company the flexibility
to maintain its dividend payments even in challenging economic
conditions.

 Michelin is committed to returning value to shareholders through

dividends. The company has stated that it intends to maintain a payout
ratio of around 50% in the long term.