SKS Microfinance said it dismissed Suresh Gurumani from the position of Chief Executive Officer due to inter-personal issues that arose between the board of directors and him after the company’s Initial Public Offer (IPO) in August.
At a Mumbai press meet organised to clear ‘misconceptions’, SKS Chairman Vikram Akula said, “Post-IPO, the dynamics of the microfinance business had changed and and inter-personal issues arose between the CEO and the board (as to how to deal with this change). It was felt that people who have been in the industry for a longer time and knew the business better should run the company.”
He added the publicity surrounding the maiden microfinance IPO had created many misconceptions, especially around the cost structures. “The board felt the new executives could better explain the cost structures to the public and customers,” he said.
A number of questions remained unanswered, such as the sequence of events that led to the termination of Gurumani as CEO. On July 16, the board approved a revised compensation for then CEO Suresh Gurumani, which included a pay raise, bonus and stock options. Then, in a meeting on September 7, the board appointed Akula as Executive Chairperson and elevated M R Rao to Deputy CEO from CFO, while approving a new compensation package for the then CEO. Less than three weeks later, on September 27, the board met again and decided to negotiate a separation agreement with the CEO. It met on October 3 and reconvened on October 4 and announced that Gurumani’s services had been terminated.
Akula declined to give any details of the severance package. He said the CEO’s separation was not on the agenda of the September 7 meeting.
Asked whether Rao’s elevation was a precursor to Akula’s exit, Paresh Patel, managing director of Sandstone Capital, which owns 10.6 per cent stake in SKS, said, “That’s an interpretation you can make.”
Akula vehemently denied any power tussle between Gurumani and himself. “We took tremendous efforts to work out a settlement with Gurumani. When a settlement could not be reached, it was decided to terminate him,” he added.
When asked why the company had waited before making the CEO’s sacking CEO public, Akula said, “When we first announced the termination, we felt that it would not have been appropriate to make the reasons public.”
SKS Microfinance shares, which have declined almost 12 per cent since Gurumani’s exit was announced, rose 3.45 per cent today on the Bombay Stock Exchange, to close at Rs 1,274.70.
In quarter-page advertisements in leading newspapers this morning, SKS said the decision to terminate Gurumani was unanimous. It also said he Gurumani would continue as a director on the board of SKS, until removed by shareholders at a general body meet. There is no shareholder’s meeting scheduled as of now, a company official said.
