Usually after mergers and acquisitions, fear and uncertainty is in full swing - of restructuring, of layoffs, of a complete rejig. But, that's normal whenever a new company takes over another. Today it was reported that Walmart-acquired Flipkart will lay off 200-250 employees from Jabong's workforce as a part of the restructuring exercise.
But it is not normal that the company asks the leadership team to leave after the acquisition. After M&A, it is the founder leaders that help the new company ease into the new business and geography. But in a peculiar event Flipkart's CEO Binny Bansal stepped down following Walmart's investigation into an allegation of "serious personal misconduct".
Bloomberg reported that a former Flipkart female employee wrote to Walmart executives in July accusing Bansal of sexual assault. The incident she refers to happened in 2016, four years after her leaving the company. It is not clear whether a formal written complaint was made against Bansal in 2016 and if the inquiry was done as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, popularly called Prevention of Sexual Harassment or PoSH Act. It is known that the charges could not be substantiated but some payments were allegedly made to the complainant.
The independent investigation initiated by Walmart also didn't find any evidence against Binny Bansal. The company's statement didn't disclose the details of misconduct but said the investigation "did reveal other lapses in judgment, particularly a lack of transparency, related to how Binny responded to the situation."
Nirmala Menon, Founder and CEO of diversity consulting firm, Interweave says, it is not as much a harassment issue but a governance issue. "It is more about Bansal not highlighting to Walmart that there was an inquiry against him."
One argument is that it was a personal relationship and hence, should not be relevant for the company. But, "Bansal is a high profile person who is watched by all and there is a moral responsibility attached to the higher status," adds Menon. Something like how in a car accident it is always the mistake of the one driving the car, even if it is the oversight of the pedestrian crossing the road.
With this move Walmart is setting the precedence that it will adhere to the laws of the land even if it means letting go of the co-founder CEO of their newly acquired firm, says Pankaj Mehta, Managing Partner at law firm Fortune Legal. "If such issue would have been ignored and made public later, it could have serious repercussions for the company in India."
Kavil Ramachandran, Executive Director at Thomas Schmidheiny Centre for Family Enterprise and faculty at ISB says building an organisation for long term is about two things: business strategy and institution building. "The founders were good at the strategy part of it, its revenue, finance, performance etc. but more than the commercial viability it is the institution building that is important." It is in the latter governance becomes extremely crucial to build a lasting organisation. Bansal's "lapses in judgment" did imply that he did err and didn't meet the high standards set for the organisation he headed, something which an institution like Walmart cannot ignore, adds Ramachandran.
What is left to be seen is if the move is prima facie a governance issue or is it a part of the company's strategy to take full control of the board, given Walmart earlier made it clear that they want only one founder on Flipkart's Board, which led Sachin Bansal to quit as its group chairman.