In 10 years running Mastercard, Ajay Banga has favored a forward-looking approach.
When the pandemic hit, Mastercard’s chief executive, Ajay Banga, made a promise to the company’s 19,000 employees: There would be no layoffs as a result of the economic destruction wrought by the virus.
It was a decision he could afford to make. During his 10 years as chief executive, Mr. Banga vastly expanded the company’s reach. Revenues roughly tripled, and profits quadrupled.
Mr. Banga says he didn’t achieve these results simply by managing for the short term. When he took over in 2010, he told investors that he would not be giving quarterly earnings guidance. Instead, he offered investors a rolling forecast of where Mastercard would be in three years, and set to work striking new partnerships around the globe.
The strategy worked. Mastercard stock has soared by more than 1,000 percent during his tenure, outperforming competitors Visa and American Express.
The pandemic has taken a toll on the company. Consumer spending plummeted early in the year as businesses closed and people stayed home. The company’s share price plunged 40 percent, though it has since recovered.
And despite being able to protect his employees’ jobs, the overall situation is making for a tumultuous end to Mr. Banga’s run. In February, the company announced that he would step down at the end of the year.
This interview was condensed and edited for clarity.
Tell me about growing up in India as the son of an Army general.
Ajay Banga: I grew up moving city to city. Adults find it hard to move, but kids don’t. In fact, moving frequently makes you flexible, quick to make friends, quick to adjust and adapt, allows you to glide between cultures and people. Because different parts of India are completely different cultures. The North is completely different from the East and the West. This is completely different than even in the South. The states are different. Languages are different. Dresses are different. Movies are different. The one thing it did for me more than anything else was this easy adaptability, the willingness to adjust and the willingness to just fit in, I think it’s helped me in all my life.
How has your background as a Sikh influenced the way you approach your work in the business world?
Ajay Banga: The Sikh religion is a very simple philosophy. The first few words of the book are, “There is only one God, and that God is truth.” Once you get that in your head clearly you stop worrying about your God, my God. There is only one God, and that is about speaking the truth. And I have tried through my life to care about that topic. I haven’t done it perfectly. I make mistakes in my personal life. I make mistakes in my professional life. But I try to admit those mistakes and then try and get back to this logic of there is only one God, and that God is truth. That concept of humility and having your feet on the ground all comes from the principles of the religion, which were all about helping the weaker person and rewarding yourself by taking care of others.
So that’s one part of it. The other part of it is the way I look. If you look like me and you work as a C.E.O. in the United States, you’ve got to be able to use the fact that you are different in a constructive way. I found my way through it by using it as a way to engage people, to explain to them why I look different, rather than feeling like I’ve got something to prove. I’ve got nothing to prove. I am who I am.
Have you experienced discrimination as a result of the way you look?
Ajay Banga: Never in a professional environment in the United States. In my personal life, post-9/11, I have been accosted by people on the street and called names. I’ve been taken aside randomly for searching at every T.S.A. checkpoint. I get that. But again, you can be pissed off about it, or you can realize that this is people trying to do their job. They’re trying to keep me safe as well as you. But I’m not resentful.
You spent much of your early career working for Nestle and Pepsi in India. What did you learn from those experiences that has stuck with you?
Ajay Banga: You’ve got to be ready for the unexpected. When I was a young manager in India, infrastructure was relatively poor. Labor relations were challenged. Phone lines were awful. You couldn’t get through to people. You couldn’t get through to a distributor. If you were waiting for baby food trucks to reach you, it wasn’t that you knew it would arrive in three days. It could take nine days. Power would go off for five days. You couldn’t get through on a phone to your own people. So that idea of knowing how to deal with ambiguity, of knowing how to deal with that form of unpredictability, it’s the way I’m trained to think.
You’re never going to get it right every time, because you’re going to make mistakes, you’re going to make decisions without full information. So the idea of taking thoughtful risks came from that environment. And having the sense of urgency to make that decision and take that risk without knowing everything, but having had the patience at the same time to listen to people who know more than you — that is an interesting balance.
How have you balanced the short-term pressures of running a public company with what’s in the best interest of the company in the long term?
Ajay Banga: Everybody — politicians, C.E.O.s — gets incentivized more for the short term rather than the long term. I’ve tried to find my balance between short term and long term all through my 11 years here. People misinterpret the short-termism to be quarterly earnings calls. I am willing to do monthly earnings calls. That’s not what bothers me. Being asked to report on my performance every month or every quarter is not short-termism. That’s being held to task by people who have entrusted you with their money. Transparency is a good thing. The problem with short-termism is if you, as a company, give quarterly guidance and then you are held to that guidance every quarter. That is short-termism.
So what I did when I came here is, I didn’t give annual or quarterly guidance. I give three-year guidance. I tell my investors, you should expect to see over the next three years us growing at an average growth rate of this, to this, this range, within average profitability of this, to this, this range. And I’m not going to make other commitments to you. I’m going to run my company. I want to grow revenue, not maximize my profitability.
With so much uncertainty early this year, what gave you the confidence to pledge that there would be no pandemic-related layoffs?
Ajay Banga: It was the right thing to do. One thing we didn’t need to do at a time like this was to add more fuel to the fire by making our employees insecure, by making them worry about their jobs, as compared to worrying about their health and their family. It was a very easy decision. So we told our people, focus on your health, on your family, and then focus on your clients and your work and stop worrying about your job.
And how has the pandemic affected spending?
Ajay Banga: The average deposit in every bank account went up because of the stimulus payments, and because people weren’t spending on holidays and theater and travel and that kind of stuff. But now with the fiscal stimulus drying up, I’m actually quite worried about a K-shaped recovery, where those who have it have enough money to spend. And then there are those who are suffering — small businesses, women, minorities, the people who got laid off from service-sector jobs.
Earlier there was a K because of inequality, but a rising tide was lifting all boats. If you think about the last 10 years, even those who got deeply impacted during the prior recession, their lives had begun to improve over this period. Wages had begun to go up. Unemployment had come down. Industries were booming. Restaurants were booming. The service industry was booming. Now it’s not happening that way. So I’m actually quite worried about that.
Given that, how do you square the inequality in this country with what many people say is excessive executive compensation?
Ajay Banga: I believe you can be paid well, if you do well. But it has to be aligned properly. My pay is very strongly aligned to total shareholder return. So if my investors benefit, I benefit. I’ve got no problem with that. I have a problem if you ignore that and you get paid, and that’s disconnected from those who have invested in you. That, to me, is a deep disconnect. I also have a problem if you don’t do some things with your employee base, that allows them to feel that their lives have been improved. When I originally came here, employee stock ownership in this company was tiny. Today, 70 percent of the employees get some form of stock-based compensation every year.
Originally published on Nytimes.com
