Megh Pillay sacked as CEO: Air Mauritius enters turbulence

Eight months after being appointed Chief Executive Officer of Air Mauritius, Megh Pillay was sacked last Friday. This decision was taken during a special meeting of the Board of Directors convened three hours earlier. Only five of the Board members were present. This event has rocked the government and dissonant voices are being heard from the Government House.

Known for being one of the best managers of the island, Megh Pillay’s contract was terminated 28 months early at the request of the airline’s Chairman, Dr Arjoon Suddhoo. In fact, it had been weeks since both men were at loggerheads on the running of the company. Indradev (Raja) Buton, Executive Vice President at the Strategic Planning and Information Systems department of Air Mauritius, was appointed Officer in Charge of the national carrier.

Things started turning sour when Megh Pillay decided to maintain a disciplinary committee against Mike Seetaramadoo, former Vice-President Human Resource & Organisational Development, who was “promoted” in January by Dr Suddhoo as Executive Vice-President Commercial & Cargo. Mike Seetaramadoo was in fact suspended from duty since October 4th for “gross misconduct.” 

Megh Pillay and Arjoon Suddhoo were not on the same wavelength regarding air access policy and the Air Corridor between Asia and Africa, two important projects initiated by the Prime Minister’s Office. In addition, Mr Pillay would have ratified an agreement with the Minister of Public Service, Alain Wong, “without consulting the management of Air Mauritius” regarding a discount of 15% on airline tickets for ministers, civil servants and their families.

It appears that Arjoon Suddhoo and Prakash Maunthrooa – advisor to the PMO – wanted to have their say in the recruitment of aircrew, but Megh Pillay was against it. “Megh Pillay did not want to hear anything about this, as he preferred a selection made by an independent committee,” confided a member of the management team.

Hours following his revocation on Friday, Megh Pillay confided on Radio Plus that he is “cool”. He uttered that “it was not a secret that there was a huge difference of opinion between the President of Air Mauritius [Arjoon Suddhoo] and I…  The government had to decide at some point and it did,” he said. Megh Pillay affirmed that the different views were based on “conflicts of interest” without giving further details.

He explained that did not carry the implications of having been a “political victim”. When asked about Mike Seetaramadoo, the former CEO maintained that the latter needed appear before a disciplinary committee. “Some wanted us to cancel the disciplinary committee. I could not do it. This contributed… [to the decision taken by the “board” of Air Mauritius to sack him],” said Megh Pillay. The former CEO also highlighted that there was no issue regarding the Air Corridor between Africa and Asia. “But it’s different in the case of Singapore and Malaysia. We had diverging views on it.”

On Saturday, Arjoon Suddhoo, Chairman of Air Mauritius, commented on the revocation of the CEO. For him, “corporate governance” was at stake and the CEO could not proceed with a disciplinary committee against Mike Seetaramadoo, despite his disapproval. The special board meeting regarding the revocation of Megh Pillay was fixed half an hour before the disciplinary committee which was to take place at 16:30 hr. Dr Suddhoo explained that the case against Mike Seetaramadoo should have been taken up at the level of the Staff Committee of the Board of Directors and not the management.

Arjoon Suddhoo also explained that Megh Pillay would be compensated as per the terms of his contract. Details were however not revealed. The former CEO had consulted two Senior Counsels, namely Desiré Basset and Ravind Chetty, to confirm that it was in his powers to go ahead with the disciplinary committee. However, Arjoon Suddhoo received a negative response from barrister Raouf Gulbul.

Majority MPs against the revocation

The Minister of Financial Services announced that the principle of the dismissal of Megh Pillay was not done in observance of good governance practices. “I think that the contract of the Chief Executive Officer was terminated in a manner which is inconsistent with the principles of good governance,” wrote Roshi Bhadain on a Facebook post on Monday.

This episode was vastly commented by majority Members of Parliament. Various members of the government expressed their dissatisfaction with the decision. Bashir Jahangeer, majority MP for Rivière-des-Anguilles / Souillac, said that he is “eagerly” awaiting the explanations of the leader of the MSM, Pravind Jugnauth. 

Members of the Parti Mauricien Social-Démocrate are also not satisfied with the decision. On an official mission in Britain, Xavier-Luc Duval made a statement on Wednesday. “Those who have taken the decision to revoke, in the circumstances that we know, the CEO of Air Mauritius, must give their explanations. I mean those who gave instructions to members of the Board to take this decision.” Xavier-Luc Duval has three representatives on the airline’s Board of Directors. However, only one was present when the decision was taken and had objected to the dismissal of Mr Pillay.

On the other hand, Ivan Collendavelloo lays the blame on Megh Pillay. “He knew there was a meeting that would lead to his dismissal. He should have defended himself but he decided not to attend,” said the Minister of Public Utilities during a wreath laying ceremony at the tomb of Dr Idrice Goomany. On an official mission in China, the Finance Minister Mr Pravind Jugnauth did not comment on the topic. When asked if Pravind Jugnauth had anything to do with this revocation, the Minister of Housing and Lands, Showkutally Soodhun, said “the Board has taken a decision. I hope its members are responsible people. But we must stop tarnishing the reputation of Pravind Jugnauth. He has nothing to do with the departure of Megh Pillay. He is used as a scapegoat.” Bissoon Mungroo, member of the board of Air Mauritius and close associate of Prime Minister Sir Anerood Jugnauth, did not hide his irritation about the ejection of Megh Pillay.

Sacked but...  still a member of the Board

To add to the confusion, Megh Pillay is still a member of the airline’s Board of Directors, despite being sacked. “Technically, he is a Director of the Board since he was elected by the shareholders. We have to know when a General Assembly will be convened to revoke him,” confided a source from the bar on Monday. Seven jurists have also had a long working session with Megh Pillay on Monday to look into the procedure adopted by the Board to sack him. The fact that no official reason has been put forward to dismiss Megh Pillay can give rise to a fierce legal battle. After having communicated the revocation decision by telephone on Friday, the secretary of the board, Fouad Nooraully, sent a confirmation letter on Monday afternoon. Megh Pillay was told that he will, among others, be entitled to six months’ salary “in lieu of notice.” According to sources Paille-en-Queue Court, the former CEO should get nearly Rs 5 million in terms of basic salary.

Long legal battle ahead

Following his meetings with a panel of lawyers led by Mr. Désiré Basset, Senior Counsel, the former CEO sent a letter to the secretary and members of the Board of Air Mauritius on Tuesday to contest his dismissal as CEO. Megh Pillay deplores the “procedural irregularities” surrounding his dismissal last Friday. In the letter, which portends a trial claim, Megh Pillay highlighted the legality of the meeting held by the Board that was called without any set agenda. According to corroborating sources, the former CEO blames the Board for having decided to dismiss him without giving him an opportunity to provide his version. He had been invited to the meeting, but he apologised for not being able to attend as he was called as a witness before the disciplinary committee against Mike Seetaramadoo later the same day. Moreover, the fact that his contract was terminated with immediate effect would demonstrate “readiness” of the Board of Directors to prevent him from carrying out his role as CEO in accordance with the principles of good governance and the articles of the airline’s constitution. Days before his dismissal, he had a bust-up with Arjoon Sudhoo and reminded the latter that “he is a Non-Executive Chairman and that he cannot interfere in the management of the company.”

Loss of Rs 123M in market capitalization

Investor’s reaction was prompt and brutal following the dismissal of Megh Pillay. At the first trading day, following the revocation of the CEO, shares of Air Mauritius were trading down Rs 1.20 that is a drop of 8.5%. This is transcribed by a decrease of about Rs 123 million in the airline’s market capitalisation. According AXYS Stockbroking Limited, the last such decline dates back to 12 May 2015, when shares shed off 8.6 per cent of their value to close at Rs 13, the lowest level in three months, explained AXYS Stockbroking. The market’s reaction was expected by brokers given that when Mr Pillay’s appointment was announced, investors confidence resulted in shares of Air Mauritius rising by 11.5 per cent over two trading sessions in late February 2016.

This decrease does not help small shareholders, already deprived of dividends for fiscal year 2015/2016. According to the latest annual report of Air Mauritius at 30 June 2016, the company had 12,179 shareholders. Of these, 10,483 held between one and 1,000 shares and 1,140 held between 1,001 and 5,000 shares. For Awadh Balluck, president of the Listed Company Minority Shareholders Association and shareholder of Air Mauritius: “It is disgusting. (...) There is no independence. This is outright interference. A CEO has the right to ask for explanations and to take actions against those who, in his opinion, deserve it.” He added that in the name of good governance, “one must know the reasons for the departure. If indeed there was any fault resulting in the dismissal, the market would not have reacted that way.” Commenting on his dismissal, Megh Pillay said: “I’m leaving at a time when the shares of Air Mauritius had stabilized. This is the best performance on the stock market with almost 30% growth.”

Bhadain meets Pillay and lambastes Advisors

“I won’t get into details as to who is wrong or right. The situation at Air Mauritius is not in line with Cabinet decisions,” said Minister Roshi Bhadain during a press conference held on Thursday evening following his meeting with Megh Pillay. The minister produced a copy of a Cabinet decision dated January 23, 2015 which pertains to the roles of the CEO and Chairman of State companies.

“The role and responsibilities of Chairpersons and Chief Executives to be kept separate to ensure balance of power and authority,” read the document. The recommendations were put forward by the Ministry of Good Governance and Financial Services. The CEO would be responsible for the day to day running while the Chairman would be responsible for the conduct of the affairs of the Board.

“This has not been followed at Air Mauritius,” added Roshi Bhadain. He recalled that the role of an Advisor is to advise. “All too often, Advisors take up initiatives because they form part of a circle of power. It is dangerous for a democracy. Unelected officials cannot change government’s policy decisions. As elected representatives, we are accountable towards the population,” said the Minister of Good Governance. The Air Mauritius case shows that “good governance is of prime importance and should prevail,” he concluded.

In a statement released on Thursday, prior to his meeting with the Minister of Good Governance, Megh Pillay wishes that his departure from Air Mauritius is not politicised. “I wish that it simply served to promote good governance and to strengthen the sense of ethics in public and private companies,” said the former CEO. 

Megh Pillay underlined that he is meeting Minister Bhadain following the latter’s request to “talk about corporate governance, a subject that is very dear to me. I was part of the team that published ‘The Report on Corporate Governance for Mauritius’ in 2004. Long before I had introduced the concept in Mauritius Telecom (MT) based on the King Report on Corporate Governance. The former judge of the South African Supreme Court, Professor Mervyn King, recently visited me and I promised to adopt his new concept of Integrated Reporting for Air Mauritius. In November 2001, I insisted that a clause on good governance structures to be inserted, among many other important elements in the shareholders’ agreement signed with France Telecom in connection with the privatization of MT. The aim was to protect the interests of all shareholders of MT after the signing of the strategic partnership.”

Mr Pillay added that “the post of CEO of a national carrier implies specific obligations on credentials discretionary to one that holds the responsibilities vis-à-vis the authorities of international civil aviation.” Regarding the conditions of his departure, Megh Pillay claimed that “personalities from all political and business spheres have personally shared their feelings. Their support has really touched me.”