According to sources, US regulators are examining SoftBank Group Corp. over allegations regarding Nikesh Arora’s activities prior to resignation last week. The Securities and Exchange Commission(SEC) office in Los Angeles is looking into whether Arora had conflicts of interest or engaged in questionable behavior as well as SoftBank’s disclosures to investors. The initiation of an SEC inquiry is a usual preliminary step and doesn’t mean SoftBank or Arora, will ever face an enforcement action or actually did any wrongdoing.
Arora, 48, said in a statement on June 21 that he would step down, co-incidentally after a SoftBank investor group had called on the company’s board to investigate the executive over his qualifications, compensation and potential conflicts of interest due to his role as an adviser at a private equity firm. After the investor complaints, a committee of independent directors at SoftBank cleared Arora of any wrongdoing a day before his resignation. The company also said that his departure had nothing to do with the investor criticisms.
The Tokyo-based company has said in a statement:
“SoftBank Group does not comment on press reports of regulatory inquiries,…It notes, however, that a special committee of independent members of its board of directors, acting with the assistance of independent counsel, reviewed the allegations in the purported shareholder demand concerning the conduct of its former president and chief operating officer. The special committee concluded that claims were without merit.”
In an interview last week, Arora said that he decided to step down after founder Masayoshi Son told him he wouldn’t be promoted to the CEO job at SoftBank next year as the two had previously discussed. Son, 58, said he had reflected on ceding the role and decided he felt too driven and energetic to give up control.
While Son and Arora both maintain that all is well, the investor group raised concerns about Arora in an 11-page letter to the board. Besides the alleged conflicts of interest, the investors criticized the executive’s investment performance, his compensation of more than $100 million in his first year and what they called “questionable transactions.” A separate letter from one investor to the board of Sprint Corp., which SoftBank controls, asked for his removal as a director there for similar reasons.
When the letters were originally made public in April, SoftBank and Son defended Arora and denied he had done anything wrong. The company said it vetted any potential conflicts in Arora’s investment decisions and had confidence in his management. At that time Son said in a statement:
“I have complete trust in Nikesh and one thousand percent confidence in him and know he will continue to do great things for SoftBank in the future,”
Arora has clarified in a statement:
“I think my track record speaks for itself,” he said. “Since my time at SoftBank, the last 18 months, I always strived to put the company first and I think none of the comments have any substantive bearing in fact.”
Son had recruited Arora from Google Inc. in 2014, promoted him to president a year ago and publicly called him the heir apparent. SoftBank had also made Arora one of the highest-paid executives in the world, with compensation of 8.04 billion yen ($78 million) in the last fiscal year and 16.6 billion yen the year before.