The sudden resignation of the president of the SoftBank Group, Nikesh Arora, demonstrates how tough it is to challenge Japan Inc.'s corporate culture, even inside one of Japan's most innovative companies. The Silicon Valley insider said without warning on Tuesday that he would step down, effective July 1, although he remains an "adviser" to the company.
Arora was the heir apparent to take over from billionaire founder Masayoshi Son ¿ but grew frustrated as the entrepreneur refused to surrender the corporate reins at SoftBank (T:9984), which trades in the United States under an ADR (SFTBY). Arora, formerly the chief business officer at Action Alerts PLUS charity portfolio name Google (GOOGL), said via Twitter that Son wanted to stay on as CEO for another five to 10 years. Arora didn't want to wait around and said it was "time for me to move on." He said he didn't want to wait in the wings past his "sell by date."
For his part, Son, 58, said he had been leaning toward offering Arora the post when Son turned 60. But he admitted he then changed his mind. "Maybe I'm still a bit too young, and still have energy to continue," he said, according to the Wall Street Journal. "I feel my work is not done," he said in the corporate announcement of Arora's departure. He remains chairman and CEO, spearheading his bid to create "SoftBank 2.0."
The resignation shows how Japanese companies struggle to accept corporate change and to open their company culture to outsiders. Arora, who joined SoftBank in September 2014, was born in India and oversaw a raft of acquisitions in that country, as well as elsewhere in Asia and in the United States. SoftBank's U.S. holdings include stakes in peer-to-peer fintech company SoFi and data-analytics provider Banjo. Arora also sold off four percentage points of SoftBank's 32% stake in the Alibaba Group (BABA) for $8.9 billion to cut down on debt.
Arora's pay package of $135 million in 2014, including his signing bonus, made him one of the top-earning executives in the world. In announcing his departure, he noted that he had a "clean chit" as a result of being cleared in a review by the board that found nothing against him. A group of shareholders had complained to management that he had made bad deals, was earning too much money, and had conflicts of interest as an adviser to private-equity firm Silver Lake.
In the departure announcement, Son said Arora "should be CEO of a global business," so he didn't want to hold him back in his career. Arora says Yahoo (YHOO) and Skype have both discussed a CEO role with him in the past. So SoftBank's loss is sure to be someone's gain, and soon.
His decision is certainly a blow to SoftBank. As Jim Cramer noted on CNBC, Arora was one of the reasons to own the stock of Google parent Alphabet while he was at that company. On Wednesday, though, SoftBank investors had accepted Son's ongoing role at the helm, with shares up 2.6% in Tokyo trade and posting a gain of 4.8% since the start of Tuesday's session, before Arora's announcement.
SoftBank on Wednesday named Ken Miyauchi as Arora's replacement as president and chief operating officer. That's a reversion to the norm ¿ Miyauchi has been with the company since 1984. Japanese companies traditionally promote from within their own ranks, and to take on a foreigner as a potential company chief is almost unheard of.
The Brazilian Carlos Ghosn has worked wonders at Nissan Motor (NSANY). But Japanese minds are equally filled with the specter of British-born Michael Woodford and his whistle-blowing at camera maker Olympus (OCPNY). Woodford questioned the payment of $1 billion in fees to obscure companies, some of them linked to organized crime. That move resulted in suspended jail sentences for former CEO Tsuyoshi Kikukawa and executive vice president Hisashi Mori.
SoftBank is one of Japan's most innovative companies, and Son one of its most outspoken executives. As its name suggests, it began in financial services, disrupting the hidebound Japanese banking industry. But it spun off its financial interests in August 2006, which now trade separately as the SBI Group (TSE:8473). The finance unit also has a Hong Kong listing (HK:6488).
SoftBank bought U.S. mobile-phone provider Sprint (S) in 2013, and has recast itself as a telecommunications company. It is now Japan's third-largest mobile-phone provider, after buying Vodafone Japan in 2006.
Sprint, the fourth-largest U.S. mobile provider, remains a weight around the company's neck. But with early stage investments in Ola Cabs, the "Uber of India," and Didi Chuxing, the "Uber of China," it's well on its way building a tech empire that would span the globe. The stake in Alibaba mentioned earlier, acquired for peanuts in its very early days, doesn't hurt either.
Quite who will oversee that expansion is, however, very much up for grabs. The company has expanded well past the point where its founder can shepherd all its activities. But Son equally can't take the necessary step back personally that would see the corporation move ahead as a whole.