Why is Britannia so secretive about Alagh's sacking? (16 June 2003)
More than a week after Britannia Industries dropped a bombshell by sacking CEO Sunil Alagh, shareholders continue to remain in the dark about what really happened at the company and who will take charge of management. Although Britannia is under the joint ownership and control of Group Danone of France and Nusli Wadia of Bombay Dyeing, Sunil Alagh was always its public face and it was seen as a ‘professionally-managed’ company. But the driblets of information leaking out to shareholders about Alagh’s sacking underlines how little companies care to communicate with their ‘co-owners’— the retail investors.
In fact, only the Finance Minister (FM) seems to have had the privilege of detailed information on what transpired. Maybe chairman Nusli Wadia believes that briefing the FM is as good as communicating with all shareholders. Alagh is obviously choosing to keep mum, at least unless Britannia decided so sue him for financial mismanagement. The corporate world is agog with whispers about ‘issues’ relating to the company’s deal to purchase the Bangalore-based Kwality biscuits, expensive and doubtful market surveys and worse; but little of this figures in the few internal documents against Alagh that have begun to emanate from his detractors.
Documents available with me paint quite a sorry picture of Alagh, one that he ought to be fighting vehemently if it were wrong. For starters, it is alleged that Alagh ran up personal expenses to over Rs 5.4 crore since 1994-95, as against a board approval of just Rs 1.7 crore. Although this may not seem a particularly significant sum in relation to his many successes at Britannia, profligacy of CEOs is today, a hotly debated issue all over the world. But more about that later. Britannia has a set of properly documented facts to show that Alagh systematically favoured his ‘friends’ in the media and generously sponsored television programmes created by them, in order to further his own relationships and build his image. The favoured ones include top media houses, advertising stars and even an NGO. The company documents these as ‘related party transactions’. While some of the documented instances and not terribly significant, his insistence in sponsoring programmes that featured his wife Maya Alagh, that too ignoring a directive from the chairman, is certainly questionable.
A more serious charge is about an advance of Rs 254 lakh to Cinevista during its March 2000 public issue as sponsorship fee for Noorjahan, a tele-serial in which his wife had a lead role. Internal documents say, ‘the advance was probably given to make Cinevista’s balance sheet look good’. Cinevista was a hot media-entertainment stock during the massive bull run led by Ketan Parekh and it has cashed in on the situation by making a quick IPO at that time. But these are issues that can, at a pinch, be explained as the CEO’s prerogative to use his judgement, even if it is faulty. But there are other charges that are revolting in the pettiness that they expose through fudged facts and doctored documentation. Three private parties thrown by Alagh, including one for Kiran Shaw’s marriage, one for V. Deshpande, the Karnataka Minister for Industries and the third, a birthday bash, were passed off as a sales conference, a distributors dinner and a sponsored cheese and cracker party respectively.
Is this normal in corporate India but only documented during a corporate war? If the answer is yes, then such fudging cannot be restricted to senior management. It probably happens down the line and suggests that private companies are as bad as public sector ones. But the allegations get more sickening. They accuse Alagh of ‘manually defacing’ the receipts to pay for the overseas mediclaim premium for his daughter Anjori Alagh. And using the same ‘defacement’ trick to pay the travel tax on air tickets on Air-India as well as Schengen Visa fees. There is also this shady allegation about a car sold in 2002, being refuelled at the company’s designated refuelling station in January and February 2003 and the bills regularised by the CEO. The nature of charges is such that the amounts are irrelevant.
A well-paid, highly celebrated corporate leader has to lead by example if he has to have any moral authority in the organisation and if Sunil Alagh has indeed been wronged by the Britannia board, he must refute them now. After all, the issues raised by the board are indeed central to the good governance practices that corporate India has been chanting for several years. We don’t expect all corporate chiefs to be as meticulous as a Narayana Murthy who pays for personal calls and even his private photocopying expenses. But one should surely draw the line at falsification of records to reimburse one’s daughter petty expenses of a paltry Rs 630.
Some defenders of Alagh have sought to transfer the blame to the board of directors. ‘What was the board doing?’ is a good rhetoric question, but it doesn’t apply. No board can be expected to check if the CEO is fudging expenses of a few lakh rupees and passing off personal parties as sales conferences. It is impossible. In fact, when the evidence mounted the Board did sack Alagh. Many Boards are far more somnolent. In all companies, it is the CEO, who runs the company and wields real power. The board oversees his actions, but with a certain basic trust in his integrity. The board can raise question policy issues, but it cannot get involved in the nitty-gritty of sponsoring television commercials and mediclaim charges.
The question is what now? Obviously, the meticulously documented case against Sunil Alagh did not happen overnight. It is part of a process that was probably hinted at when Alagh said he would not seek to renew his contract. So why is the company being so secretive about issues that led to his sacking? More importantly, why can’t it seem to find a successor after holding two marathon meetings? The grapevine suggests that Nusli Wadia wants his son Jeh to head the company and his foreign partners are not as keen on this succession plan. So the company is pretending that its business as usual. It has announced a share buyback plan to hike promoters’ holding, without bothering to appoint a CEO. The pity is that the more Brittania’s management delays sharing full information with its retail shareholders, the faster it loses its moral edge in sacking the CEO who seems to have had it coming.
-- Sucheta Dalal