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Business

Arora's exit highlights SoftBank's succession problem

TOKYO -- The unexpected departure of SoftBank Group President Nikesh Arora is raising concerns over one-man rule by Chairman Masayoshi Son, who doubles as CEO and is expected to take charge of international operations when his heir apparent steps down.

"My mental and physical ability should not hold the company back from growing," Son had said when asked why he was rushing to find a successor. The plan had been to turn the Japanese telecommunications giant over to Arora to usher in "SoftBank 2.0," the second stage of growth.

Yet Son "started wanting to stay on a little longer" while approaching his self-imposed retirement. He had a 20% stake in SoftBank at the end of March, making him the leading shareholder. The recent development raises questions as to whether he is managing in the interests of other stockholders as well.

It is highly unusual for a company to shake up its leadership on the eve of a shareholders' meeting just because its chief executive got cold feet. "Legally speaking, it's not a problem," a corporate governance lawyer said. "But Mr. Son has the responsibility to explain why this happened to his shareholders."

A number of shareholders had raised questions regarding Arora's performance as president. SoftBank had just dismissed such concerns Monday as "without merit." Son has also said that "no leader can replace" Arora in running the international businesses.

Some market watchers believe that SoftBank will be forced to revise its management strategy. "The company will lose the connections Arora had in India and Google," said Jun Tanabe of JPMorgan Securities Japan.

"SoftBank faces renewed risks now that its succession planning is back to square one," said Masahiko Ishino of the Tokai Tokyo Research Center. Son said he plans to remain CEO for at least another five to 10 years. "Investors could take the company's muddied outlook negatively," Ishino warned.

(Nikkei)

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