RBI directive to private banks on wholetime directors

The RBI has directed private banks to have at least two whole-time directors on the  board within four months. 

Establishment of such a team may also facilitate succession planning, especially in the background of the regulatory stipulations in respect of tenure and upper age limit for MD & CEO positions,” the RBI said in its notification

Of course. But we need to ask: why is it necessary for the regulator to issue such a direction in the first place? Is it not the job of banks boards to have ensure succession planning by having a couple of whole-time directors? The RBI has been nudging private banks to do so. Its directive probably reflects the failure of banks to respond suitably. It is noteworthy that public sector banks do not suffer from the malaise of having none other than the CEO on the board.

The RBI directive tells us how poor succession planning is in banks. Indeed, succession planning is poor almost anywhere in so-called professionally managed companies. No CEO wants a couple of alternatives to himself or herself around. Most succession planning is about ensuring that no successor emerges. A paper once compared the photograph of the CEO surrounded his top management team with a photo of about ten years earlier. The only constant in the two photos was the CEO! He had ensured that all others in the team had departed.

That is not unusual. Only when the CEO is about to leave or has left do boards scramble to find a successor. How pathetic!