In what has been a complete shocker for most in the tech and entrepreneurial community Softbank, one of the richest investment firms in the world, is witnessing an ensuing internal strife as a group of investors has called upon the firm’s board to look into the affairs of President Nikesh Arora.
According to reports from Bloomver, the first signs of trouble came as early as January, when the Softbank board received a letter from American law firm Boies Schiller & Flexner, acting on behalf of an unspecified and unidentified group of Softbank stakeholders.
However, that wasnt the only indication of the trouble brewing. Nikesh is also a director at Sprint corp, the US telecom company, and apparently, its board also received a letter from an investor, who wanted him to be removed as director.
The investors, through the letter delivered by the law firm, also criticized what they called as Arora’s poor investment performance and a series of questionable transactions done under his tenure.
As per Matthew Schwartz, a partner at the law firm handling the case on the investor’s behalf
Despite these issues, the SoftBank board saw fit to make Mr. Arora the third-highest paid executive in the world without any track record of accomplishment at the company.
The investors also called for an independent investigation into Mr.Arora’s affairs.
We believe that an independent investigation will establish compelling grounds for the boards of SoftBank and Sprint to dismiss Mr. Arora from his executive and board positions.
In all fairness though, Softbank founder and Chairman Masayoshi Son, certainly had his reasons for naming Arora as the most suitable candidate to replace him, when the 58 year old billionaire finally retires.
In a statement, Mr.Son reafffirmed his choice and faith in the 48 year old executive.
I have complete trust in Nikesh and one thousand percent confidence in him and know he will continue to do great things for SoftBank in the future
Although Arora’s rise at Softbank has been nothing short of meteoric. After working at Google for a decade — and rising to become the chief business officer — Arora joined SoftBank in 2014 and became president about a year later.
Speaking on the controversy, Arora said,
I think my track record speaks for itself. Since my time at SoftBank, the last 18 months, I always strived to put the company first and I think none of the comments have any substantive bearing in fact.
And you can hardly say that he isn’t committed to the company. Workplace records quite apart, Nikesh also made a huge personal bet last August when he announced his intentions of purchasing almost 60 billion yen of the company’s shares, worth somewhere about $483 million at the time — a fortune by any standards.
The company’s stocks are on an up and down ride at present — mostly due to the swings in the fortunes of Alibaba and Sprint Corp, which are two of its most valuable investments. As things stand now, the value of Softbank stocks are down around 20 percent from where they were when Arora first joined the company.
Another point the investors brought to the fore was the performance of Nikesh’s investments — he leads investment affairs — particularly focusing upon DramaFever and Housing.com, both of whom haven’t been doing so well lately, to drive their point home.
However, Softbank rejected these arguments by stating that investments by their very nature, are a high risk affair and many of the companies backed under Arora’s tenure — such as Snapdeal — are doing quite well. A spokesman for the company said,
It is entirely premature to evaluate an investment track record after 18 months; SoftBank is a long term investor.
The investors were also very interested in Softbank’s grounds for paying Arora, what they termed as alarming and intolerable amounts. Arora is quite ridiculously well paid with the company paying him16.6 billion yen for the seven months of the previous fiscal year.
However Softbank said that the amount was so large so as to compensate for the Google shares Arora had to forgo when he came to work with Softbank. And anyways, if the company feels that his skill set merits such a large reimbursement, then its really the company’s affair.
The final count the investors are in a huff about is Arora’s position as an advisor to Silver Lake, a firm with which Arora’s relationship goes back to his Google days. The investors in their letter, have also alleged that the Softbank president is misusing his position at Softbank and his making investments for Silver Lake, that are similar to the Japanese company’s commitments.
This dual role has the potential to reward Silver Lake to the detriment of SoftBank.
This is yet another argument that has been trashed as groundless by both Arora and his firm. While the former said that his involvement with Silver Lake has been minimal since joining Softbank and he is considering actually leaving soon, the latter said that Softbank was well aware of the relationship and considered it beneficial. A spokesman also said that any potential conflicts of interest arising out of Arora’s role were examined by top executives, including Son.
Meanwhile, the board is looking into the matter. However, making such accusations — against an executive who has time and again proved his worth in various capacities — and not backing them with any concrete evidence, is likely to get the investor’s objections thrown out by the Softbank board.
Softbank shares were also affected by the disclosure and fell by 5 percent today, after finally closing 1.4 percent higher at 6,088 yen.