Arun Sarin’s Roller-coaster ends as he Collects Vodafone’s Golden Goodbye


When Arun Safin took over at Vodafone it was widely considered that he was in for a roller-coaster ride. So it came to pass. But are we seeing an increasingly politicised role of the CEO to the detriment of their functioning as long-term leaders?

The Telegraph’s story [June 2008]centred on the scale of the golden goodbye.

Assuming the company hits maximum targets, his shares and options will be worth just over £22m at today’s prices when he leaves: he has 20m unvested options worth £4m, 8.5m unvested performance shares worth £8m, unexercised vested options worth £4.4m, and previously awarded shares worth £5.7m. Since he joined, the company has also paid £2m into his pension pot.

The leadership story had already broken last month when Arun Safin’s departure was leaked.

Mr Sarin’s move to the top job at Vodafone in 2003, when he replaced Sir Christopher Gent, proved to be the continuation of a roller-coaster ride for the Vodafone board and its shareholders. Decisions to abandon a near-$40bn (£20bn) takeover of AT&T Wireless, and later to stick with Vodafone’s minority stake in Verizon, aroused scep¬ticism among shareholders about Mr Sarin’s position in the world’s biggest mobile phone market.

It gets easier to go

Business leaders of large firms are increasingly suffering considerable grief in their jobs from shareholder activists acting on behalf of powerful financial interest groups. That can be argued to have some positive effect on effort. But does it always have a positive effect on performance?

An embattled CEO may become far too concentrated on what might be called the political dimension of survival, than on the other components requiring attention for building a successful company.

Leaderswedeserve has been following this roller-coaster ride as an example of a boardroom battle.

The case pointed to the increasingly frequent influence of boardroom activists on business leaders and we concluded that Mr Sarin would not have an easy ride. It was not a difficult prediction to make.

3 Responses to Arun Sarin’s Roller-coaster ends as he Collects Vodafone’s Golden Goodbye

  1. Ismail Erturk says:

    Tudor, the influence of fund managers and capital markets on CEO performance and pay in a financialized economy is explored in the financialization literature from various points of view and would in essence support your observations about CEOs under shareholder pressure. Stock market needs convincing narratives from the CEOs which need to be backed by quarterly produced numbers. Sarin could not really control the emerging narrative about Vodafone in the financial markets and this was reflected in the share price. After Gent Vodafone needed a strong narrative of growth in a mature industry. Sarin’s failure partly lies here until he came up with the story of growth in emerging markets. Luckily there has not been a financial crisis recently in any of the emerging economies Vodafone got involved. But he still ended up with a very handsome pay package. Research has demonstrated that executive pay is correlated by size rather than by shareholder return. J Bachelder, US lawyer who negotiates CEO remunerations, put this in a nutshell in a FT interview when he said “For 20 years of J Welch, what did (his total remuneration of) $1bn cost the shareholders of GE? 10c per share.” So £22m pay for Sarin in a company with about £35bn of revenues “look” small. For those interested in finding out more about financialization and firm performance I can recommend: Froud et al’s “General Electric: The Conditions of Success” available at http://www.cresc.ac.uk/publications/papers.html and Erturk et al “Financialization at Work”, Routledge 2008, which has a wider range of readings on management at financialized firms.

  2. Tudor says:

    Thanks Ismail. The interface between leadership and governance literatures seems a most important and under-examined ‘frontier’. Maybe financialization studies are starting to do something very valuable there.

  3. danny quinn says:

    hello,i am doing an ict gcse project please may i use your picture for it.

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