It is learnt that the microfinance company feels that going to the EGM will only lead to washing of more dirty linen in public. The sacked CEO may also not prefer staying on the board of the company
After unceremoniously sacking its CEO, Suresh Gurumani, the board of directors of SKS Microfinance Limited seem set for a settlement with him rather than take the matter of his sacking to the Extraordinary General Meeting (EGM).
Moneylife learns that at its board meeting on Friday, 22nd October, the SKS Microfinance board is understood to have decided that going to the EGM at this time - as directed by the Andhra Pradesh Court - would only lead to the washing of more dirty linen in public. Our sources say that although SKS's founder Vikram Akula and director Paresh Patel of Sandstone Capital were in favour of sticking to the decision of sacking Mr Gurumani, the other independent directors apparently did not want to precipitate the situation.
Mr Gurumani who attended the meeting, is understood to have left, once the board decided that it would work at an amicable settlement. He is also understood to have said that he is not in favour of continuing in the board. While there are no media reports on the proceedings of the board meetings, Moneylife learns that the board spent a lot of time discussing the Andhra Pradesh Ordinance to regulate microfinance and its possible impact on SKS's business.
On 4th October, the board of the Hyderabad-based company had terminated the services of Mr Gurumani four years ahead of the expiry of his contract and named MR Rao as his successor. Mr Gurumani had a five-year contract from April 1, 2009 to expire on March 31, 2014. The company in its notification to stock exchanges did not attribute any reason to his termination.
Now that the SKS board wants an end to the public spat over his sacking, Gurumani's settlement will, in all probability, be what was being discussed before his sacking: 1.25 lakh stock options and payment of a year's salary (a stunning Rs2 crore a year in a microfinance company). As we had reported earlier, the settlement fell through because Mr Gurumani rejected the many onerous conditions that were included in his severance deal. It was then that the board decided to sack him and has not managed to offer a credible explanation for its actions. A more acceptable new settlement is now being worked out and Mr Gurumani clearly wants to keep quiet until he cashes his cheque.
Mr Gurumani's employment terms apparently specified that if he was terminated 'with cause', he would lose all his stock options. Given this deal, we learn that the company tried to find a 'cause' for sacking. This means that Suresh Gurumani will walk away a very rich man after just two years as head of a company that claims to alleviate the problems of India's unbanked poor.
Meanwhile, as SKS's stock prices continue to tumble and the board grapples with the new Andhra government ordinance, a shareholder told us, "Isn't it amazing that a company which claims to deal with India's poorest and needy persons does not have a single board director who is from among the people it lends to."
Every board member of SKS Microfinance has been with a foreign bank or private equity company with an Ivy League background. It probably explains why the company felt it could get away with sacking a CEO without reason just a couple of months after a major IPO.
Atul Takle, who is in charge of communications at SKS Microfinance has written to us to say: "As you are aware, proceedings of board meetings are privileged information and we would not be able to comment on those."
Interestingly, SKS Microfinance has made no announcement to the stock exchanges about their proposed change of mind and the fact that a settlement in favour of former CEO Suresh Gurumani would involve a big payout at a time when the company is already facing serious issues over the structure of the microfinance business.
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