Soft­Bank's hired gun takes high road to own­er­ship

The Pak Banker - - OPINION - Peter Thal Larsen

Soft­Bank's hired gun is tak­ing an un­usu­ally straight­for­ward route to own­er­ship. Re­cent re­cruit Nikesh Arora is in­vest­ing 60 bil­lion yen ($483 mil­lion) in the Ja­panese tech group's shares. It's a re­fresh­ing al­ter­na­tive to the stock-based pay schemes that are the norm for Soft­Bank's Sil­i­con Val­ley ri­vals. A strong show of con­fi­dence may also help the ex-Googler push through some of his more ad­ven­tur­ous ideas. Even for Arora, who spent a decade at Google and was the search gi­ant's high­est-paid ex­ec­u­tive in 2012, the in­vest­ment is - in his own words - "an enor­mous risk". It's al­most four times the 16.6 bil­lion yen the Ja­panese group paid him fol­low­ing his ar­rival last year, mostly as com­pen­sa­tion for the re­stricted stock he left be­hind at Google.

Buy­ing 0.7 per­cent of Soft­Bank will ce­ment the pres­i­dent and chief op­er­at­ing of­fi­cer's po­si­tion as the even­tual suc­ces­sor to Masayoshi Son, who still owns 19 per­cent of the com­pany he founded. The big bet may also help win sup­port from out­side share­hold­ers for some of Soft­Bank's more re­cent cor­po­rate wa­gers. Arora's ar­rival has co­in­cided with a spend­ing binge at the $72 bil­lion group. In an at­tempt to re­peat past suc­cesses such as its in­vest­ment in Chi­nese e-com­merce gi­ant Alibaba, Soft­Bank has ploughed money into in taxi-hail­ing apps and online re­tail­ers, pumped $1 bil­lion into South Korean e-com­merce group Coupang, and un­veiled a ven­ture to spend $20 bil­lion on so­lar energy in In­dia.

Not many ex­ec­u­tives put their per­sonal wealth at risk for a com­pany they did not set up. Western cor­po­ra­tions tend to lav­ish high-level re­cruits with op­tions and re­stricted shares that only pay out if they per­form. Though these schemes give em­ploy­ees an in­cen­tive to suc­ceed, the down­side of fail­ure is usu­ally small. By con­trast, Arora will have equal mo­ti­va­tion to pre­vent Soft­Bank shares from fall­ing as he will to pump them up. Nev­er­the­less, con­fi­dence can be mis­placed. Con­sider for­mer Ap­ple ex­ec­u­tive Ron John­son, who spent $50 mil­lion on war­rants ex­change­able into J.C. Pen­ney stock at the pre­vail­ing mar­ket price when he joined the re­tailer in 2011. John­son was ousted af­ter less than two years, and the shares have con­tin­ued to lan­guish. Man­agers who are own­ers have more at stake but they can still be wrong.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.