Scangroup CEO risks end of an era amid board feud

Bharat Thakrar, 69, has for more than four decades prided himself as a dealmaker and king in corporate Kenya when it comes to building and protecting brands.

The roles have changed and Mr Thakrar is now battling to protect his brand after the firm, WPP Scangroup #ticker:SCAN, he helped found suspended him to investigate allegations of gross misconduct. The camaraderie he built with UK-based conglomerate WPP Plc from 2008 when he sold them a piece of the Nairobi bourse listed marketing firm is shattered.

The deep-pocketed WPP brought in new capital and global expertise in the rapidly changing communications and advertising business.

Mr Thakrar on the other hand would continue to leverage his experience and extensive local contacts for the benefit of the company.

In return, he would run an even bigger empire as the company went on an acquisition spree and worry less about job security.

Since he took the CEO post in 1999, Mr Thakrar has always enjoyed an open-ended contract with the end of his contract marked N/A (not applicable).

The cushy arrangement, which had lasted 13 years, came to an abrupt end on Friday when the listed firm announced that it had suspended Mr Thakrar and chief finance officer Satyabrata Das.

The suspension is to enable an investigation into allegations of gross misconduct and possible offences in their capacity as senior executives and employees of the company, Scangroup said in a statement.

The wording of the statement implies that the duo took advantage of their privileged positions to carry out the alleged misconduct, which was not specified but could include irregular financial transactions.

Mr Thakrar declined to comment on this story.

This is the first time a chief executive of an NSE-listed firm has been suspended or sacked publicly for ethical misconduct. Most firms have opted not to disclose the reasons for the sudden departure of their leaders.

The bold move by Scangroup is seen as the application of WPP Plc’s strict ethical codes. The multinational has a detailed code of business conduct that states its commitment to fight a raft of crimes and misdemeanours including bribery, discrimination and insider trading.

“We will not have any personal or family conflicts of interest within our businesses or with our suppliers or other third parties with whom we do business,” the code reads in part.

Mr Thakrar’s troubles are a miniature replay of the ignominious ouster of WPP Plc’s iconic founder and chief executive Martin Sorrell in 2018.

Sir Martin left the multinational after the board investigated him for bullying junior employees and mixing corporate and personal spending including a visit to a London brothel.

It remains to be seen what evidence the Scangroup board investigation will reveal, their consequences and the response by the two executives.

Mr Thakrar, the most famous of the two and a Kenyan citizen, is staring at major reputational damage. Scangroup on the other hand risks making a hefty exit compensation to the executives besides increased competition should the wealthy and well-connected Thakrar decide to build a new marketing services firm.

Mr Thakrar earned a total of Sh88.5 million in the year ended December 2019 alone, including a basic salary amounting to Sh49.1 million.

Mr Das, an Indian citizen and who was appointed to the CFO post in May 2019, was paid a total of Sh17.8 million over the same period. In an exceptional incentive scheme, Mr Das was given a total of 1.2 million Scangroup shares for free.

He was scheduled to take delivery of the shares in three equal batches of 400,000 units on June 30, 2020, June 30, 2021, and June 30, 2022.

In the absence of the duo, Alec Graham will take over their responsibilities in his current capacity as the interim chief operating officer.

Mr Thakrar’s partnership with WPP started in 2008 when Scangroup sold a 27.5 per cent stake to the multinational for Sh1.3 billion. Before the deal, Mr Thakrar had always been the top shareholder even after taking the company public on August 29, 2006, when it raised Sh94 million through an initial public offering (IPO).

“It provides us a second anchor shareholder other than the founder shareholder, Bharat Thakrar. One of your board’s key objectives, as we transitioned from a private company to a public company, was to have a succession plan for Scangroup that would ensure stability and continuation of the business in the long term,” Scangroup said of the deal with WPP in 2008.

“The investment by WPP provides us the springboard to expand into the continent in line with our vision of being the leading marketing service company in Africa.”

The growth ambitions were realised and Scangroup went on an acquisition spree that included acquiring some of WPP’s subsidiaries in the continent.

This, however, had the effect of raising the multinational’s stake in the NSE-listed firm to the current controlling level of 56.3 per cent and diluting other shareholders including Mr Thakrar.

Mr Thakrar, who also sold some of his shares along the way, has seen his holdings drop to the current 10.6 per cent stake that he jointly owns with his wife Sadhna.

The stake, which was previously valued at more than Sh1 billion at the height of the 2015 bull run, is now worth about Sh258 million based on the current market price.

Scangroup’s share price fell 5.7 per cent to close at Sh5.6 on Friday after the announcement of the executives’ suspension.