Khan to get off Jet

Shah Rukh Khan has decided to bail out of Jet Airways after a three-year stint as a non-executive director on the board of the loss-laden private airline.

Khan, who signed a multi-crore deal here today with FoxStar Studios for the distribution of his forthcoming movie My Name is Khan, has informed the airline that he won’t be able to stay on as a director on the board of the airline because of “other business commitments”.

The busy actor-producer has not attended a single board meeting in the past three years.

King Khan will not be seeking re-appointment as a director when shareholders meet to vote on resolutions at the annual general meeting in Mumbai on August 17.

The airline, which suffered a loss of Rs 402 crore last year, said it would not fill Khan’s vacancy on the 10-member board. The superstar had joined Jet Airways as an additional director on August 16, 2006, when the airline had the largest market share in the country.

At that time, Jet was going through a rough patch with its image battered after a Rs 2,200-crore deal to acquire Sahara Airlines had gone sour. The buzz was that Shah Rukh Khan’s presence on the board would add some glamour quotient to the Naresh Goyal-owned airlines’ battle-scarred image. Later, Jet acquired Sahara Airlines and renamed it JetLite.

Two other celebrities – film producer Yash Raj Chopra and writer and lyricist Javed Akhtar – are on the airlines’ board. Chopra had joined the board in April 2006 and will be seeking reappointment.

Under the regulations, directors have to seek their reappointment every three years. Akhtar has been a Jet director since 1993 and was re-appointed last year. Chopra and Akhtar have a better record as directors having attended seven and six board meetings respectively in 2008-09.

When Khan was elected as a director of the airline at the AGM in September 2006, he had told shareholders: “While it is true that I do not have the expertise in the airline business as other members of the board, I believe I can add value to the company and the shareholders with certain creative inputs.”

But Khan has been expanding his own business interests: he floated Red Chillies Entertainment with wife Gauri in 2002, became a part-owner of the IPL franchisee Kolkata Knight Riders, and established a film production company with Juhi Chawla and Aziz Mirza.

Although Khan hasn’t received any sitting fees from Jet Airways while missing board meetings, the airline has been reasonably generous with other payments.

A quick glance through annual reports reveal that in 2008-09, Jet paid Rs 1.70 crore as production cost for television advertisements to a company in which Khan was a director.

In 2007-08, the airline paid Rs 1.63 crore as an advance against production of television ads to a company in which Khan was a director. In 2006-07, Khan earned a commission of Rs 3.3 lakh.

Prithvi Haldea, chairman and managing director of Prime Database, says celebrities as independent directors bring glamour to a company’s board, but their knowledge of balancesheets and Sebi regulations is very limited.

Prime maintains a database of every director on the board of listed companies, which is hosted on the website of the Bombay Stock Exchange.

“They may add value to the company by bringing in more business. However, a director’s primary role is to improve the interests of a minority shareholder and this is beyond their realm,” Haldea added.