Chairman loses vote 1-8; new managing director to get five-year term.
In a day of high drama, Axis Bank Chairman P J Nayak today resigned after the board voted against his opposition to the appointment of Shikha Sharma as the next managing director and CEO.
Nayak’s term was coming to an end in July this year.
The board meeting went on for seven hours, though the entire duration was not spent on the succession issue. The nomination committee of the board had recommended Sharma for the job, but Nayak did not agree to that. A vote was taken, in which eight members supported Sharma's name and the only person who opposed it was Nayak.
The board felt that Shikha Sharma, currently MD & CEO of ICICI Prudential Life Insurance, had a more rounded experience than Hemant Kaul, who was Nayak's candidate. Kaul is Axis Bank’s executive director in-charge of retail operations.
The board has recommended a five-year term for Sharma, who had earlier denied any move to leave the ICICI group after putting in 29 years at the financial services conglomerate, with nearly a decade at ICICI Prudential Life Insurance. Over the next few weeks, the bank is also expected to seek regulatory and shareholder approval for appointing K N Prithviraj the non-executive chairman.
Sharma was generous in her praise for Nayak. She told Business Standard that she would carry forward the legacy of Nayak who has built Axis Bank into a "great franchise". Sharma also said the Axis Bank offer came as a “pleasant surprise and a fantastic opportunity”, but she had not yet put in her papers at ICICI.
The government played a crucial role in Sharma’s appointment, with all its nominees from the Specified Undertaking of UTI, the entity that took over the assured return schemes of the erstwhile Unit Trust of India, deciding to opt for an outsider. SUUTI holds 27.08 per cent stake in the bank, while public sector insurance companies have another 15 per cent.
SUUTI has four nominees on the board — R H Patil, K N Prithviraj, A T Pannir Selvam and Nayak himself. While in the past, Nayak enjoyed good relations with the finance ministry, where he was a joint secretary before moving to Mumbai, he has differed with SUUTI on many issues over the last few years.
Problems between Nayak and the board have been brewing for a while. In May 2007, the RBI had insisted that the post of the chairman and managing director of Axis Bank should be split. The board was told that there must be succession planning and Nayak must groom his successors. And splitting his post was one way of moving in that direction.
But the RBI did not make much headway as Nayak argued that he would quit if the regulator insisted on splitting his job. This was around the time that Axis Bank's Chief Operating Officer was also leaving. As a consequence, Nayak's wishes were granted and he stayed on as Chairman and CEO.
Since then, the board has been asking Nayak to look for a successor. But the former bureaucrat has been arguing that he did not believe in grooming one. He has been pointing out that in public sector banks, there is no such practice. A chairman and managing director quits one day and the next day, another person takes over. The board, however, has been arguing that it was a question of following good practices.
Sources familiar with the developments said four months ago, the board gave Nayak the option to stay on as a non-executive chairman and asked him to appoint a CEO. The suggestion was to create a structure somewhat similar to what has been proposed for K V Kamath in ICICI Bank. This proposal too was turned down by Nayak. Both the RBI and the board were not happy about this situation where all powers were concentrated in one person and there was no succession planning.
Earlier this year, divisions in the bank board first surfaced again over a proposal to spend nearly Rs 1,000 crore in building a corporate office in Worli. After some of the SUUTI nominees dissented against the move, the proposal was dropped.
Around the same time, the board began looking for professional help to identify Nayak’s successor. It met internal candidates, but realised that none of them had a rounded experience to be the ideal candidate to head the bank. It is then that Sharma's name was suggested. When Nayak decided to record his dissent and the vote taken showed that he had been isolated, he decided to close his file and left the room abruptly.
Nayak could not be reached for comment.
At today’s board meeting, the SUUTI nominees adopted a joint position and pushed for Sharma’s appointment. Sensing the mood, the other directors also supported the proposal.
Sharma is the fourth woman to be appointed as the head of a bank’s Indian operations. While Chanda Kochhar is due to take over as ICICI Bank MD & CEO on May 1, Naina Lal Kidwai has been appointed as the head of HSBC group’s India operations. In addition, Meera Sanyal is the India head for ABN Amro, though she is on a sabbatical at present.
Renuka Ramnath quits ICICI Ventures, Mulye to take charge
In a much anticipated move, ICICI Ventures’ Managing Director and CEO Renuka Ramnath put in her papers in the board meeting on Monday. Vishakha Mulye, executive director, ICICI Lombard, will take over from Ramnath.
This issue was considered at a board meeting of ICICI Ventures, the private equity business arm of ICICI Group, held on Monday.
Ramnath's resignation comes on the day when private sector lender Axis Bank appointed Shikha Sharma, managing director and CEO, ICICI Prudential, as its next chief. Sharma is likely to be succeeded by V Vaidyanathan, executive director, ICICI Bank.
The decision about Vaidyanathan’s appointment will be taken in the board meeting of ICICI Bank on April 25. The financial services conglomerate is expected to announce management changes at other subsidiaries, too.
Both Ramnath and Sharma were reportedly in the race for ICICI Bank's top position to succeed Managing Director & CEO, K V Kamath, till Joint MD Chanda Kochhar was appointed to the position late last year. Kocchar is due to take over on May 1.
Mulye has been executive director of ICICI Lombard, the general insurance arm of ICICI Group, since October 2007. From 2005 to 2007, she was the chief financial officer of ICICI Bank.
