Did Walmart put Flipkart deal over Bansal investigation?

Walmart faced transparency dilemma over disclosure

In a statement announcing the resignation of Binny Bansal as Flipkart Group chief executive on Tuesday, Flipkart’s owner Walmart said an internal investigation found “a lack of transparency, related to how Binny responded to a charge of “personal misconduct”.

About two months after the US retail giant agreed to buy Flipkart, Walmart was faced with a transparency conundrum of its own: Should it disclose to its shareholders that the founder of the firm that was to be its biggestever acquisition was facing an allegation of sexual misconduct?

The subsequent chain of events shows that Walmart chose to prioritize the closing of the Flipkart deal over disclosing the probe into Binny’s conduct.

A Walmart spokesperson did not immediately respond to queries raised by Mint.

Walmart agreed to buy 77% in Flipkart for $16 billion in May. As part of the deal.

In July, Walmart received a complaint from a former Flipkart employee against Binny. She alleged sexual misconduct, people familiar with the matter said. This misconduct was alleged by her to have happened in 2016, by which time she had left the firm, they said. Walmart hired an external law firm to investigate the matter. But as important as the investigation, was the question: how does it handle the communication of the matter?

While it had agreed to buy Flipkart, Walmart was yet to get approval from the Indian antitrust regulator. If the investigation into Bansal’s conduct found him guilty, Walmart would have inherited a mess.

After its joint venture in India with Bharti Enterprises blew up spectacularly partly because of ethics issues, the US firm couldn’t afford another corporate governance disaster.

Eventually, Walmart decided against disclosing the information about the probe.

In August, Walmart closed the acquisition after getting the approval of the Competition Commission of India.

“Even though the investigation (into Binny’s conduct) was started in July and Walmart did not close the deal till August, there’s a reason why the companies did not disclose that Bansal was being investigated. At that point, there was no assumption that he was guilty. So, if Walmart had disclosed that Binny was being investigated, it would have maligned his reputation unnecessarily—more so, if he was found not guilty later. And as it turns out, he was not found guilty of misconduct,” said a person familiar with the probe.

One consultant who had worked with Walmart said its handling of the matter was poor. “If they were worried about Binny’s reputation, then it’s not like the statement they issued helps matters. It is clear that no one—Walmart or the Flipkart investors—would have wanted to jeopardise the deal by disclosing the complaint in July. If they had disclosed it then, it’s very much possible that some shareholder in the US would have asked them to keep the Flipkart deal on hold until the investigation was complete,” the consultant said.