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When minority shareholders rejected InterGlobe Aviation Ltd compensation package for its CEO

Shareholder activism has been on the ascent. In general, this is a welcome trend, though with one big caveat. Minority owners must never hurt their own interests. This could happen if they let an envy of pay packages cloud their view of business realities. Stock options are one such reality.
InterGlobe Aviation Ltd compensation package for its chief executive officer (CEO) Ronojoy Dutta, who took charge in January 2019 and led the carrier through a severe bout of post-covid turbulence. Last year’s big disruption left the company with a net loss of over ₹4,659 crore in the first nine months of 2020-21, as reported, far worse than its ₹247 crore loss on revenues of about ₹35,756 crore in 2019-20. In those three quarters, Dutta was paid ₹8.2 crore, including a committed bonus of ₹3.75 crore. This payout, a clear drop from his previous year’s total of ₹17 crore, was widely taken as par for the course, apparently, but what provoked a rebellion among minority shareholders was an award of stock options that would let him buy 185,000 shares—25% next January, 35% a year after that, and the rest near the end of 2023—at an ‘exercise price’ of ₹765 each. Some analysts forecast earnings in 2022-23 that would easily justify a stock price that’s double of ₹765. Yet, with covid raging, no one can be sure of what to expect.

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