Kingfisher Airlines – Ethical Dilemmas of Mr. Vijay Mallya

Kingfisher Airlines was grounded last month. The agitating employees refused to come to work from 1 October 2012. Employees had been peacefully protesting earlier for payment of their salaries from February 2012. Management ignored the pleas and the plight of the employees increased. On 4 October 2012, Kingfisher’s store manager Manas Chakravarti’s wife Sushmita Chakravarti committed suicide. In her suicide note she stated – “My husband works with Kingfisher where they have not paid him salary for the last six months. We are in acute financial crisis and so I am committing suicide”.

The employees led a candlelight vigil in support of the grieving family. However, there was not even a word spoken about it by Vijay Mallya, the chairperson of the company on such a tragic incident. He did not mention anything on his twitter account until 23 October, and most of the month he was not available in India. Media reported that he flew out of the country in his personal Airbus. Check out the following tweets.

Vijay Mallya ‏@TheVijayMallya – 23 October 2012.

I travel 24×7 where my multiple work responsibilities take me. Sections of media call me an absconder because I don’t talk to them.

His Formula One team reportedly participated in Korea and he attended the race. He then attended the Indian Grand Prix and his twitter comments are below. They caused a storm in the twitter world.

Vijay Mallya ‏@TheVijayMallya – 26 October 2012.

 I have learnt the hard way that in India wealth should not be displayed. Better to be a multi billionaire politician dressed in Khadi

 Vijay Mallya ‏@TheVijayMallya – 27 October 2012.

Kingfisher is probably the most written about Airline in the World thanks to Indian media. Top of mind brand recall must be at its highest.

The comments don’t show true leadership qualities. He appears to be completely disengaged from the situation his employees are facing. A little bit of humility and sharing of pain would have gone a long way in appeasing the hurt feelings of his employees. Though he is not legally liable to pay salaries to employees from his personal wealth, he has to take moral responsibility for his actions that have caused so much tragedy in the lives of his employees. Some personal austerity would have sent a different message to the world. However, in an interview Vijay Mallya made the following statement and refused to take responsibility for the financial mess.

“In a Plc where is one man, who might be the chairman, responsible for the finances of the entire Plc? And what has it got to do with all my other businesses? I have built up and run the largest spirits company in the world in this country.”

Kingfisher’s net-worth was eroded last year. The banks have refused to grant further loans since the outstanding amount is Rs. 7000 crore (USD 1299 million). Accumulated losses amount to Rs. 6000 crore (USD 1114 million). You can read the details in my earlier post (link here).  Since March 2012, Directorate General of Civil Aviation has been asking for a revival plan to resolve the crises. However, Kingfisher management took no concrete actions. On 20 October 2012, the Directorate General suspended the license of Kingfisher Airlines.

The situation is that the bank, investors and employees are the biggest losers. Vijay Mallya’s personal shareholdings in the company is just 1.87%.  His group companies – United Breweries (Holdings) Limited, Kingfisher Finvest India Limited and UB Overseas Limited – hold 33.97%. Individual investors hold around 33%. Banks and other institutions hold the balance shares. Hence, Mr. Mallya will personally not be liable and may not suffer extensive damage to his personal wealth.

Though, recently Forbes has dropped him from Billionaire list and stated that now he is only worth USD 800 million now. He made a satirical comment on it

Vijay Mallya ‏@TheVijayMallya -26 October

Thanks to the Almighty that Forbes has removed me from the so called Billionaires list. Less jealousy, less frenzy and wrongful attacks.

 Closing thoughts

Mr. Mallya is blaming the media for inaccurately bashing Kingfisher Airlines. It is a strange reaction considering the dire state of the company. He has abdicated his professional responsibilities as leader of the group. He is also not taking any moral responsibility for the situation and the damage. I am amazed at his brand management team. The Kingfisher brand was worth a whole lot. Due to his personal negative reactions and his son’s Siddharth Mallya being oblivious to the churning controversies, the public is completely outraged. Besides the moral disconnection, there doesn’t appear to be any control on communications and brand management.

According to you what should be the appropriate reaction for the Chairman of a company in such a situation?

References

Vijay Mallya flies in to attend Indian GP, blasts media for Kingfisher coverage – Economic Times

 

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6 comments on “Kingfisher Airlines – Ethical Dilemmas of Mr. Vijay Mallya

  1. Forget moral responsibility- these people do not know what morals are. Let him atleast behave in the professional manner that he is expected to- how did his personal empire come from? from thin air? He earned from Kingfisher( read the unholy nexus between him and politicians who killed Air India to give freeways to private airlines) and his breweries( read making more getting drunk and ruining families) and then of course the Formula I and IPL- the
    list goes on.
    When he gloated as the head of such a huge business empire, he perhaps forgot that along with name , fame, also comes responsibility!
    If the bankers were smart and had taken his personal guarantee for the loans, he sure has to cough up…

    • Davala,

      You are right, he is coming across as a person who enjoys the perks of the job without the responsibility that comes with it. He is acting victimized that the press is targeting him, which is a strange reaction for an industry leader. Yes, the baks do have some personal guarantee but that is for a small amount, most of it is borne by the companies. So investors lose.

      Sonia

  2. Mallya was expecting a bail out package from the government for the airline just like Air India received.

    If the banks also have a 33% share, is it not possible for them to take the majority decisions? or is it that the other 2 companies of Mallya may be forming a collusion and taking the decisions ignoring the banks say in it..

    • Hi Ishdeep,

      Yeah, I know. Even the FDI is a little bit late to help Kingfisher out.

      Obviously the bank would have directors on the board, but from the looks of it they have not been exercising their intelligence. Otherwise it was predicted a long time back that Kingfisher Airlines strategy is all wrong. But seeing Mr. Vijay Mallya’s money and political clout, none of the directors would have said a word. It was basically his how, though now he wants to share the blame. Banks only started taking a few tough calls when it became an NPA. They should have woken up earlier.

      Sonia

  3. Hi sonia,

    More than the fault of Mallya, i believe its the banks fault too, who funded that much amount of money without any security of receiving it back. After all its the peoples money. If its declared NPA, the banks will charge it from the customers in some way or the other. Mr. Chidambram rightly said recently, small borrowers are honest pay back masters, its the big corporates who fail in paying back. And banks run after these corporates only…

    Ishdeep

    • Ishdeep,

      You are right, it is the banks duty to periodically scrutinize the status of big lenders. Unfortunately because of the political clout, banks fear to take tough actions and rely on vague analysis. For example, it is well proven that a person successful in one industry does not automatically guarantee success in another, but banks will consider it so. So investors pay of the companies and of the banks. Generally it is the individual investors who end up funding all these disasters.

      See the current case of Infosys. Since the new CEO Sibbu, something is going wrong inside Infosys. Everyone is aware of that, but no one has take action on it. In the end investors will suffer. He became a CEO not because of capability but because of a deal that all Infosys founders will get a chance on becoming a CEO.

      That is why, it is always safer to rely on performance.

      Sonia

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