In 2011, Vikram Pandit, the Indian origin CEO of CitiBank vowed to take a salary of USD 1 until Citigroup returned to profitability.
As a young kid back in 2012, when I was in my first year of college and read this piece of news, I was elated.
Wow! A CEO vowing to take a 1 dollar salary of a global bank. So impressive.
Cut to 2021, Zomato is going for an IPO and media is hung ho with massive coverage here and there.
While reading a column on Business Standard yesterday, I couldn't help but notice a big marked callout stating that the Zomato CEO went for a 50% pay cut during 2020.
Now, when you read both these news together the immediate thought that comes to your head -
Why would someone want a paycut? How are they ok with it?
Well, the name of the game is ESOPs - Employee Stock Option Plans.
Neither Vikram nor Deepinder stopped receiving stock options i.e. the right to buy shares at a later date at an agreed price (the strike price).
Vikram had got almost USD 3.5 mn stock options even in a year when he drew an annual salary of USD 1.
Deepinder's 5.5% stake in Zomato almost values his options at ~USD 400 mn in IPO bound Zomato.
Zomato and it's founder have been around for 10+ years.
The point?
Equities don't work if you don't think long term and vice-versa.
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