INSUBCONTINENT EXCLUSIVE:
MUMBAI: British American Tobacco (BAT) defeated a special resolution to grant stock options to employees of ITC and its subsidiaries in a
move that rekindled memories of the battle for control between the overseas shareholder and the Indian company’s management that raged two
decades ago.
BAT didn’t support the move, the first time it has done so on stock options, as the London-headquartered company didn’t
want its 29 per cent stake getting reduced, denying that this meant a reopening of old wounds
“We are supportive of plans to incentivise executives and employees of ITC with company shares as long as the incentivisation is not done
in a manner which is dilutive to ITC shareholders,” a BAT spokesperson told ET
“This could include buying shares in the market for issuing employee stock option schemes (ESOPs), which a number of other large and
wellrespected Indian companies have done in recent years.”
ITC told the exchanges on Thursday that plan got 63.5 per cent of the votes,
less than the 75 per cent for needed for such special resolutions
While 98.7 per cent of the votes of institutional shareholders were in favour, 89.2 per cent of the votes of non-institutional public
shareholders (largely represented by BAT) were against
Indian shareholders — largely backed the measure
The voting was held during September.
“We are disappointed that the special resolution recommended by the board of directors for approval
of the shareholders for granting, offering and issuing of equity settled stock appreciation rights (SARs) has not been approved primarily on
account of the overseas shareholder who chose to vote against it,” an ITC spokesperson told ET in an emailed response.
Change in
Approach“Ever since equity-linked incentives have been extended to the eligible employees, the total shareholder returns generated by the
company have grown at a CAGR of around 20 per cent, significantly outperforming the stock market,” the spokesperson said.
Shareholders,
including BAT, have previously approved granting of ESOPs up to 5 per cent of the issued share capital in 2001, 2007 and 2010
The stock options in this latest instance accounted for up to 2 per cent of the issued capital and would have led to an estimated 0.6 per
cent dilution in BAT’s holding over the next 14 years.
“In the past, dilutive executive share schemes were very typical and BAT has
voted for them,” BAT said
“However, there has been a clear movement, over time, for companies to adopt non-dilutive executive compensation plans
BAT has adopted this approach with respect to its own senior executive share schemes
We have been very clear since 2010 that we would not be supportive of any future proposals that are dilutive to the shareholders of
ITC.”
This latest development has sparked speculation about old animosities between BAT and the Indian management resurfacing after more
than two decades.
BAT rejected this notion.“This is simply and importantly a matter of our fiduciary duty to our shareholders and does
not, in any way, undermine our support for the ITC management and employees,” the company spokesperson said.
BAT last month named insider
Jack Bowles as its new CEO
He is currently the COO of BAT’s international business
The second-largest tobacco firm with sales of $26 billion, BAT has been one of the worst performers among global tobacco stocks in local
Its stock is down 31.3 per cent year to date
By contrast, ITC has gained 5.3 per cent this year.
