There is much speculation about who will succeed Aditya Puri as CEO of HDFC Bank. the search for a successor has commenced just about eight months before Puri is due to leave. If it’s any consolation, it’s not the only
leading bank that’s trying to ensure a smooth succession. Some of the world’s
top banks are grappling with the same problem- and the circumstances at those
places are far more challenging.
The CEO of UK’s Barclays Bank, Jes Staley, announced last
month that he would step down in about a year’s time. Staley had to quit after
financial regulators announced a probe into his links with Jeffrey Epstein, the
billionaire who died in jail while facing charges of paedophilia.
Two years, Staley had faced a storm when it was disclosed
that he had tried to uncover the identity of a whistle blower who had written
to the board of Barclays with complaints about him. The board let Staley keep his
job but he had to pay a fine of £640,000 levied by the regulators.
Staley has been CEO for five years. The board has said
it will look outside for a CEO. That says something about succession planning
at UK’s second largest bank. If nobody inside measures up, the board should
have made the assessment long back. It would then have had time to induct an outsider
and groom him or her for the top job.
Things are not much better at HSBC. Its CEO, John
Flint, had to step down last August on grounds of under-performance after just
18 months into his job. The board has opted to name an interim CEO which meant that
it was keeping its options wide open in respect of the appointment. If that
wasn’t bad enough, last month the interim CEO chose to announce a restructuring
that would involve shedding 35,000 jobs over the next three years. What CEO want to own a radical restructuring
initiated by somebody else?
At Swiss giant Credit Suisse, the CEO, Tidjane Thiam,
the first black chief of a top European bank, was somewhat abruptly shown the
door last month following unsavoury revelations. Last September, a detective
from a private agency was caught tailing a former senior executive of Credit
Suisse. It turned out that agency had been hired by the Chief Operating Officer
of Credit Suisse.
The COO was fired and the board sought to distance
Thiam from the affair. However, the plot thickened. Credit Suisse, it was
revealed, had also spied on its former head of human resources! To its credit,
the board has been quick to name an insider and bank veteran as CEO. But
the perception that the bank’s culture is flawed will not go away quickly
At J P Morgan Chase, Jamie Dimon reigns supreme after
more than 14 years as CEO. Last January, Dimon declared blithely that he had
not set a retirement date for himself. There is no obvious successor in sight. Naturally.
Several potential successors have left to take up CEO positions elsewhere. J P
Morgan Chase is a star performer. However, performance does not exempt an
organisation from the requirement of succession planning.
Boards must have a set of two or three
potential successors at any given point, with the choice narrowing to one over
time. Goldman
Sachs is a good example. More than a year before Lloyd Blankfein stepped down as CEO, the bank
named two co-chief operating officers. A year later, one of them got the job.
At GE under the late Jack Welch, three insiders were marked for succession
several years before Welch’s retirement. Jeff Immelt got the job.
A G Lafley, a former CEO of Proctor & Gamble, has
written about how he started work on succession planning virtually from day
one. “Many CEOs,” he wrote in an article
in the Harvard Business Review, “don’t push their boards to discuss what might
happen when they leave because they don’t want to think about it…” This was said in 2011. It seems not much has changed
since. The upheavals caused by the global financial crisis of 2007 have evidently
done little to change governance and culture at private banks.
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