#MeToo has arrived at the Flipkart headquarters in Bengaluru. Flipkart co-founder Binny Bansal has stepped down from his role of Group CEO after allegations of "serious personal misconduct" relating to a two-year-old complaint of sexual assault made by a former employee of Flipkart.
What next for Flipkart? Was his exit related only to the allegations of misconduct? Do we know more about these allegations? What next for Binny Bansal? These will be among the questions we will tackle on this edition of our Pick of the Day. My name is Rakesh, and you are listening to Moneycontrol.
EVENTS LEADING UP TO BINNY BANSAL’S EXIT
Walmart, recent acquirer of 77 percent stake in Flipkart for $16 billion released a statement about Binny Bansal’s exit. It read:
"Earlier today, Binny Bansal announced his resignation as CEO of Flipkart Group, effective immediately. Binny has been an important part of Flipkart since co-founding the company, but recent events risked becoming a distraction and Binny has made a decision to step down.
His decision follows an independent investigation done on behalf of Flipkart and Walmart into an allegation of serious personal misconduct. He strongly denies the allegation. Nevertheless, we had a responsibility to ensure the investigation was deliberate and thorough. While the investigation did not find evidence to corroborate the complainant’s assertions against Binny, it did reveal other lapses in judgement, particularly a lack of transparency, related to how Binny responded to the situation. Because of this, we have accepted his decision to resign."
First, let's get to "recent events".
According to multiple reports, the allegations of sexual assault were made by a female former employee of Flipkart in 2016; she had exited the company in 2012. In 2016, when she started a firm of her own is when she came in contact with Bansal again, and also when this alleged sexual assault took place. She promptly filed a complaint. It was during the time when Bansal had only recently taken over as CEO from the other Bansal (Sachin), who had become Executive Chairman. The former employee, upon finding that no appropriate action was taken, then approached Walmart Global in July this year, no doubt emboldened by the political zeitgeist. She wrote to Walmart CEO Doug McMillon. Even as negotiations for the deal were still afoot, Walmart and Flipkart roped in an international law firm to investigate the matter. Investigations began in July; the Walmart-Flipkart deal was signed by mid-August.
Walmart, apparently, was unhappy about Binny not disclosing the details about the complaint against him during the negotiation process. According to the Wall Street Journal, Walmart interviewed Bansal who told investigators that he had a consensual relationship with the woman and denied he had assaulted her. The Journal also reported that Bansal did not disclose that he had hired a private security team to make the matter go away.
The investigation, meanwhile, found no evidence to corroborate the complainant’s assertion, instead concluding that it was a consensual affair, but did reveal "lapses in judgement" on Binny’s part, Walmart concluded. That, and "particularly a lack of transparency" relating to how Binny chose to respond to the situation.
The irony of a letter accusing Binny Bansal of lack of transparency being itself quite so opaque has not been lost on anyone.
BINNY BANSAL’S EMOTIONAL RESPONSE
In his letter to Flipkart employees, Bansal, too, spoke of his "lapse of judgement." The letter, full text of which, was obtained media outlets read:
"Dear Flipkart Family,
Since co-founding Flipkart with modest resources in 2007, the journey we have embarked on together has been arduous and rewarding, culminating with the fantastic news of our partnership with Walmart earlier this year. They have been great partners and I am optimistic about our future together.
For some time, I have been mulling over the right time to step away from an operating role at Flipkart Group.
My plan was to continue in my current role for a few more quarters to continue the transition after closing the deal with Walmart. However, my decision to step down has been accelerated by certain personal events that have taken place in the recent past.
These events relate to a claim of serious personal misconduct made against me, which was uncorroborated after a thorough investigation completed by an independent law firm. The allegations left me stunned and I strongly deny them. The investigation, however, did bring to light lapses in judgment, particularly a lack of transparency, related to how I responded to the situation. These have been challenging times for my family and me. I am concerned that this may become a distraction for the company and the team. In light of these circumstances, I feel it is best to step away as Chairman and Group CEO.
I will continue to be a large shareholder in the company and will continue to serve as a member of the Board of Directors."
The line – "For some time, I have been mulling over the right time to step away from an operating role at Flipkart Group" – has come under some attention now by observers. While his founding partner Sachin Bansal exited the company, after giving up his 5 percent stake for approximately $1 billion dollars, Binny Bansal had stayed on as CEO and Chairman, and according to sources close to the action, did not seem like a man who had only a few Flipkart quarters left in him. Only a few months ago, in an interview with Bloomberg, Bansal had said he was still in charge of Flipkart and would remain group CEO after the Walmart acquisition.
"Both sides are convinced that keeping Flipkart running independently makes the most sense," he told Bloomberg. "It's a board-managed company and decision making is still done the exact same way."
During the interview, Bansal certainly did not come off as a man on the out as he discussed Flipkart's strategy to snag the next 100 million customers including using native languages, giving buyers more access to credit and launching inexpensive products under Flipkart's private labels.
Brittain Ladd, brand consultant, writing for Forbes, echoed that view: "At no time have any of my contacts within Flipkart stated to me that Bansal was contemplating leaving the company. Just the opposite. Bansal was elated that Walmart had acquired Flipkart. For the record, Bansal was an extremely popular CEO and many within India viewed him with reverence for what he and his co-founder, Sachin Bansal had accomplished."
Which automatically begs the question: was this Walmart’s plan all along?
Some former Flipkart executives, speaking to The Times of India, seemed to think so. "Sachin was the more feisty [sic] among the two founders, while an amiable Binny was expected to ensure continuity. Now Binny’s exit under tightly-scripted secrecy clauses, even as he retains board seat and shares, strengthens the belief that Walmart was interested in life beyond Bansals," said one former Flipkart executive.
"One cannot help but feel that Binny was jettisoned for more than one reason," said another former colleague when asked about allegations of personal misconduct against him. He said the Flipkart grapevine was buzzing about the new owner digging out an old, unproven allegation against Binny some three months ago.
WHAT NEXT FOR FLIPKART?
With this latest development, both Flipkart founders, Sachin Bansal and Binny Bansal, are out of the company. The two, former employees of Amazon, met as students at IIT-Delhi and together founded Flipkart, Indian startups' greatest success story.
With the exit of Binny Bansal from any operational role in Flipkart, Kalyan Krishnamurthy will continue to be the CEO of Flipkart, which will now include Myntra and Jabong, continuing to operate as separate platforms within the Flipkart business. Ananth Narayanan will remain CEO of Myntra and Jabong and report to Krishnamurthy. Sameer Nigam will continue to lead PhonePe as CEO. Both Krishnamurthy and Nigam will report directly to the board.
Kalyan Krishnamurthy assured the company employees that it will be business as usual, going forward. "Flipkart's leadership position today was possible due to the years of hard work and collaboration between all stakeholders of the e-commerce ecosystem, particularly you, whose ingenuity and dedication have led us to become the market leader in India," he said, while assuring the employees that there will be no more changes to the existing structure.
Krishnamurthy had first joined the online retailer in 2013 as its interim Chief Financial Officer (CFO), following which he joined Tiger Global as its Finance Director in 2014. He was earlier with eBay’s Asia finance operations. He became the CEO of Flipkart in January last year and was given the mandate to turn around the company’s fate against rival Amazon.
Ananth Narayanan as CEO of Myntra and Jabong will report to Kalyan. Ananth was earlier with consulting firm McKinsey & Company and came to Myntra as CEO in October of 2015.
Sameer Nigam will continue leading PhonePe as CEO, Walmart said. Sameer served as Senior Vice President of Engineering at Flipkart until August 2015. He co-founded PhonePe in December of 2015, which was subsequently acquired by Flipkart in April 2016. Both Kalyan and Sameer will report directly to the board, Walmart said.
As for the future, Brittain Ladd, has a piece of suggestion for Walmart leadership. Writing for Forbes, he said, "There are crocodiles in India, big ones. A technique used by a crocodile to kill its prey is to drag an animal into deep water and drown it. Amazon is going to do everything in its power to drag Walmart into deep water in India. Flipkart must have a CEO skilled enough to grow the company while navigating the danger posed by Amazon. I believe that person is Marc Lore."
Will this restructuring happen? Only time will tell.
Buying Flipkart was a key move by Walmart, as Walmart continues to fight a high-pitched battle with Amazon in the US and elsewhere. It has not entirely been smooth-sailing since for the partnership. The deal, Walmart’s biggest yet, was aimed at staking a claim in the still-nascent but potentially super lucrative Indian market. India has 1.3 billion people and a fast-growing economy, with millions adopting technology and smartphones for their shopping needs. The high price tag that Flipkart came with even caused Walmart to lower its earnings forecast for the fiscal year 2019. Walmart clearly has big dreams (and deep pockets) for its operations in India, and clearly wants to have no issue niggling away at the progress it hopes to make.
Binny’s exit is also a reflection of how the corporate world is changing – how allegations are taken seriously, how they are thoroughly investigated, and how there are heads falling for improper behaviour. Google did it with Android co-founder Andy Rubin (and also gave him a cushy severance package of $90 million); CBS has sent Les Moonves away. Closer home, several media and advertising organisations including AIB, OML, The Viral Fever have seen heads fall on account of problematic behaviour. This can only be lauded. Creators of extraordinary wealth are not exempt from asking for consent. That is simply not how it works. It may have, sadly, once. But not anymore. Time’s up for that.
A noted journalist, writing for Firstpost, seems to think that is problematic. "Millennial feminism and social media activism are the twin forces that are making startup gods develop feet of clay. Or at least, they lose their haloes. New gender equations are turning rockstars into tragic heroes in a dystopic landscape." The blessed man could well be from the early 1900s screaming at a cloud – "oh these women – they want the vote?! How very dare they!" Women having the courage to finally speak up about the injustice they have suffered and suppressed for fear of professional retaliation and loss of a job are to be lauded, not made to seem like the antichrist. Calling an era of empowerment for half the population is called progress, sir, not a "dystopic landscape."
Sure, the investigation came up with no proof for the assertions that the complainant made in this case, but to make complaints of this nature, in general, seem like a witch hunt (that phrase again) is a grave failure of thought at best, and grotesque misogyny at worst.
We wish Binny Bansal the best in his future endeavours.