1. Consider the governance chain leading from the various shareholders of UBHL to the managers in the main businesses, with particular reference to United Spirits. Why might there be breakdowns in accountability and control in this chain?

2. Group the various key stakeholders discussed in this case (economic, social/political, community and technological). What risks do key stakeholder groups face (including Diageo)?

By 2015, one of India’s most powerful and dynamic conglomerates, United Breweries Holdings Ltd (UBHL), was on the brink of disintegration. In the preceding three years, it had been forced to sell down its ownership stakes in India’s largest brewery (United Breweries), India’s largest spirits company (United Spirits) and a substantial chemicals and fertiliser company, MCF. UBHL’s chairman and dominant shareholder, Vijay Mallya, was struggling to retain the last vestiges of control. His key brewing and spirits businesses now depended on partnerships with two Western multinationals, Heineken and Diageo. Relations with the first were amiable; with the second, they were bitterly acrimonious.

King of the good Times

Vijay Mallya had inherited control of the UBHL conglomerate at the age of 28, upon the death of his father in 1983. He had divested non-core businesses and reorganized the tangle of remaining subsidiaries into a clear divisional structure based on coherent business areas. UBHL grew rapidly and by 2007 Vijay Mallya ranked 664 on the Forbes global list of billionaires, with an estimated fortune of $1.5bn (about £950m or €1.2bn).

As it entered the second decade of the twenty-first century, UBHL was selling about 60 per cent of India’s spirits and 50 per cent of its beer. The group was organized into four main businesses: brewing, spirits, airlines and chemicals. External shareholders had substantial ownership stakes in each of these businesses, reducing the capital obligations on UBHL. However, Mallya guaranteed effective control of each business by ensuring that in each case UBHL was the largest shareholder, if not the majority owner. Mallya’s overall control of the parent company UBHL was assured by dominance of the voting A class shares, while Indian and foreign institutional shareholders held the overwhelming majority of non-voting B class shares. Non-executive directors included Mallya’s son, ‘Sid’ Mallya, pursuing a modeling career in the USA, the British businesswoman Dajlit Mahal, an associate of Mallya’s for 22 years, and V K Rekhi, who had been associated with UBHL for nearly 40 years, and was a former president of United Spirits.

Though a shrewd businessman, Mallya was extravagant in his personal life. Playing on the name of his most prominent beer brand, Kingfisher, he often described himself as ‘King of the Good Times’. He surrounded himself with beautiful models and actresses, and the annual Kingfisher Calendar became famous in India for its photographs of scantily-clad women. He owned several expensive yachts and a fleet of luxury vintage cars. In 2008, Mallya and a business partner bought a Formula One racing team,.....