Axis Bank theatrics

The curtain has finally been rung down on the succession issue at Axis Bank. P J Nayak staged an undignified walk-out after a stormy board meeting, paving the way for Shikha Sharma from the ICICI group to take over as CEO with board member Prithviraj taking over as interim chairman.

Nayak, going by reports, was completely isolated on the succession issue, with even those close to him for long deserting him in the final moments. Nayak wanted Kaul, an executive director, to succeed him. He has argued in an interview with BS that an organisation should bring in an outsider only if it is weak. Not true. It may need to bring in an outsider also if the insiders are weak (which can happen in an organisation that is strong but has been a one-man show).

Nayak had earlier successfully resisted the RBI's efforts to bifurcate the positions of chairman and MD, saying he needed time to groom a successor. It turns out that he failed to do so even when given adequate time. This is not uncommon- BS had an edit yesterday mentioning the cases of L&T and ITC where the present chairmen seem to think themselves immortal.

The right thing has happened at Axis Bank and this is, in large measure, due to the role played by the nominees of SUUTI who presented a united front on the issue and made the process of finding a successor rigorous. It appears that even in a private bank, it is the government that has to be around to ensure the right outcome. This will not come as a surprise in the present times where the same phenomenon is being seen on a bigger scale in the US banking system and elsewhere.

One last point. Nayak's quitting as chairman in a huff was inappropriate. One could have understood if some legal or ethical issue had been involved. There wasn't any. Nayak left in a fit of pique only because he couldn't have his way.

This isn't done. Banks run on confidence and for an executive chairman to walk away without ensuring a smooth hand over can be potentially harmful. It's a different matter that the Indian banking system is in good shape and that we need not fear such an outcome in the present instance.

Incidentally, I was told that AT Paneerselvam, board member at Axis and former chairman of IBA, collapsed in his car and passed away while on his way to the airport from the seven hour board meeting. Strange that no paper has reported this.