Why Did Walmart fire Binny Bansal?

The year 2018 has turned out to be a graveyard for top-notch leaders and role models – starting from Mark Zuckerberg (Facebook) and Elon Musk (Tesla) to Chanda Kochhar (ICICI bank), there has been no shortage of leadership failures this year. Just when the terrible 2018 was about to end, another leader bites the dust – Binny Bansal has been forced out of Flipkart due to personal misconduct.

The Bansal Story

The two Bansals who co-founded Flipkart – Sachin and Binny – are quintessential entrepreneurs. Both graduated from the “playground for entrepreneurs”- the prestigious Indian Institute of Technology. Myntra CTO Jeyandran Venugopal who originally hired the Bansals to work for Amazon described them well “They were obviously high energy, enthusiastic folks, with high potential and talent. They were great engineers, and had the spark to go big.” His reading of the Bansals turned out to be prophetic - after a short stint in Amazon, they started Flipkart ... and the rest is history.

Cut a long story short, after ten years of roller coaster ride, Flipkart was acquired by Walmart for an eye-popping $16 billion valuing Flipkart at $20 billion - the world's largest ecommerce deal then. The two Bansals became billionaires post the acquisition.

A mixed legacy

Sachin Bansal wasn’t without his flaws. Sachin Bansal’s App-only based turnaround strategy for Flipkart almost killed Flipkart in 2015. Further, Sachin Bansal’s shenanigans on the deal table with Walmart backfired leading to his exit from Flipkart altogether.

Binny Bansal - the data-driven, easy-going co-founder – emerged a clear winner in the Flipkart-Walmart deal discussion and was anointed Flipkart’s Group CEO. All through the Flipkart journey, he remained largely above-board and untouched by scandals …. Until now.

Binny Bansal transgressions and exit

Unbeknown to anyone, an alleged consensual extra-marital affair between Binny Bansal and a former Flipkart call-center employee went so sour that things came down to blackmail and extortion. How did Binny handle this issue? Exceprts here -

Binny tried to manage the situation on his own by deploying a security firm. One of the investigators that Binny had hired had called the complainant for a meeting and tried to physically assault her. However, she escaped. When she informed Binny about the assault, he, instead of addressing the issue or responding to her, hired another security firm to cover up the matter. The second firm tried to settle the matter by offering monetary compensation, but she demanded a higher amount.

Binny thought the matter was closed and failed to disclose the matter or the manner in which it was handled to Walmart during the acquisition due-diligence process, perhaps treating it as a personal matter. Unfortunately for him, this wasn’t an entrepreneurial challenge that he was adept at handling, it was a matter of emotions - and human emotions are notoriously unpredictable. That matters didn’t die down despite his attempts at a passive cover-up is clear from the fact that the aggrieved call-center employee wrote to Walmart CEO who was hitherto unaware of this episode. Walmart wasn’t pleased and behind closed doors, engaged a law firm.

As if all this wasn’t disturbing enough, Walmart's decision to accept the resignation after the investigations added to the sense of disquiet – after all, why ask a hugely successful, well-liked CEO to resign when the affair was in the personal space (the woman didnt work for Flipkart at the time of the affair) and the investigation revealed that the affair was consensual? 

What was the rationale behind Walmart’s decision?  

The context

Binny Bansal was no ordinary executive – he was the CEO and board director. Secondly, post-acquisition, he no more worked at a startup, he was the CXO at a global behemoth that valued its reputation. Since CEO’s are usually the face of their organizations, even their personal actions can have tremendous impact on their organizations’ brand and reputation. Partly because of this, blue-chip organizations hold their top executives to a very high standard of discretion, disclosures and judgments – even for actions falling in personal domain. In fact, actions outside office often matter more for CXO's given the importance of integrity - after all, integrity is doing the right thing even when no one is watching you.

Left without a policy, most people base their decisions and resulting actions on their personal ethics and values – a fuzzy space that varies from person to person. To reduce scope for ambiguity in expectations and bring in governance, top corporates expect CXO’s to adhere to policy books and established structures. Entrepreneurs often struggle here - Adherence and preference for established structures is one leadership quality that entrepreneurs – in comparison with experienced executives - are known to abhor.

The approach of Binny Bansal – the archetypal entrepreneur – of not-disclosing what he thought was a personal matter might have worked at a startup like Flipkart where he was a founder, but not at a Fortune 10 company like Walmart which had different expectations from its executives. Binny’s failure to switch gears from an entrepreneurial mindset to that of a corporate executive proved fatal.

The ecosystem

Adding to this is the ecosystem impact. Across the world, the spread of the #MeToo movement - in which women have publicly accused prominent personalities from film actors and journalists to even cabinet ministers of sexual harassment leading to the downfall of several of those –has charged up the environment. Organizations, especially global MNC’s, realize that the catalyzing force of such an environment can cause even a minor spark to lead to a big explosion and take extra precautions if any such episode is reported, lest it affects their reputation. The seriousness of the complaint and the timing of Binny’s non-disclosure – bang in the middle of the #MeToo movement- added to the Walmart leaderships’ sense of unease causing them to become extra-cautious. This is reflected in the alacrity of their action.

Seen in this light, it is clear that Walmart leadership preferred the short-term upheavals caused by Binny’s exit rather than put up with a long term reputation and legal risk of inaction in a highly charged atmosphere. The net effect was Binny’s exit from Flipkart.

Alternate perspective

Did Walmart have ulterior motioves in firing Binny? We wont know for sure, but even if it did, Binny Bansal's indiscretion made the task a lot easier for Walmart.

But wait - wasnt Binnay Bansal well-liked by his staff? Wasnt he a rock-star, super-successful billionaire CEO? Wasnt he a role model for several fellow entrepreneurs and millenials - wont his firing demotivate them? Wasnt he from "the" IIT? How can he be fired ?

It is here that we need to understand an important point. Being well-liked, successful, rich famous, role model are great attributes but NOT a replacement for indiscretion, lapses in judgment or lack of tranparency. Substituting one for the other represents a warped idea of leadership and sets a dangerous precedent that could harm the entire leadership ecosystem. Binny's exit could lead to a short-term period of self-doubt in the entrepreneurial ecosystem but the resulting soul-searching exercise and tightening in disclosure norms could have lasting positive impact.

Epilogue

As Binny overcomes the shock of his exit and reflects on why his past has come back to haunt him, he would do well to recall the childhood quote -

Watch your footsteps - The more you take, the more you leave behind.

So is it all over for Binny Bansal? Not if he heeds the advice of Steve Jobs.

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Raja Jamalamadaka is a TEDx and corporate speaker, entrepreneur, mentor to startup founders, winner of "Marshall Goldsmith award for coaching excellence" for being top 100 coach to senior industry executives, a board director and a member of CXO search panels. He was adjudged as LinkedIn Top Voice 2018 for being one of the platform's most insightful and engaging writers. His primary area of research is neurosciences - functioning of the brain and its links to leadership attributes like productivity, confidence, positivity, decision making and organization culture. If you liked this article, you might like some of his earlier articles here:

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