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Binny Bansal's exit from Flipkart shows how secrecy around HR disclosures can be a deal-breaker

All workplace complaints have to be necessarily disclosed to counter-parties during a transaction

Source: Moneycontrol.com | Nov 16, 2018 10:32 AM IST

A Mumbai-based education technology company was being acquired by a sector player in June 2018. The valuation process was underway when due diligence threw up a strange result. The company’s chief financial officer was on leave for three months during a crucial sales period. Detailed probe revealed that he was undergoing an inquiry on a misconduct allegation and was asked to proceed on leave. While the complainant settled for a written apology, the acquirer was not comfortable with this detail being hidden and hence decided to withdraw the offer.

On November 13, Binny Bansal resigned as Flipkart Group CEO after an independent probe into an allegation of serious personal misconduct, Walmart said in a statement. While Walmart did not specify the exact nature of the charges against Bansal, a top source told Moneycontrol that the development is related to a complaint from a female colleague a few months ago.

However, the Walmart statement mentioned that while the investigation did not find evidence to corroborate the complainant’s assertions against Binny, it did reveal other lapses in judgement. The statement said that there was a lack of transparency related to how Binny responded to the situation.

Human resource officials Moneycontrol spoke to asserted that whether or not a complaint is true, all cases of misconduct have to be mandatorily disclosed. Otherwise, deals can get dropped at the last moment.

In the education sector deal mentioned above, the acquirer had global clients. They going ahead with the deal would have legal ramifications since they were bound by contracts to disclose compliance rates at their group companies.

Sunil Goel, Managing Director, GlobalHunt said that records of not just issues related to employees, but those pertaining to vendors, employees, independent contractors or even customers need to be disclosed.

“If a matter has been reported and has been recorded in the official records, the related parties in a deal have to be informed about it. For example, if it was a sexual harassment case, disclosures on the action taken and if the complainant was satisfied with the action is crucial,” he added.

Industry sources also told Moneycontrol that global players, especially in retail and FMCG sectors are very particular about workplace relationships.

“If a large global player is entering India through an investment, they expect to be briefed about all workplace matters in the acquiree. Workplace affairs could be common in some industries, but MNCs take particular notice of these matters. Even a consensual relationship is not permitted at several global firms,” added the human resource head at a mid-size IT services firm.

On the other hand, some companies make it mandatory for employees to disclose any romantic relationships with co-workers even if they are not explicitly barred as per the HR policy. Here, non-disclosure can attract legal penalties and may lead to the concerned persons losing their employment.