Axis Bank has always steered clear of controversies. The bank has been the epitome of some of the best practices of Indian banking. The annual results of the bank announced in the morning of April 20 with a 100% dividend per share showcase just that.
But by afternoon, when Shikha Sharma was named the next managing director and chief executive officer of Axis Bank, despite incumbent chairman and CEO Pangal Jayendra Nayak?s vociferous opposition, the bank found itself in a very new territory. The possibility of Shikha Sharma taking over from Nayak, who was supposed to retire in July was doing the rounds for months. But the public spat was just unanticipated.
For the record, the 10-member board recommended a five-year term for Sharma, who is currently head of ICICI Prudential Life Insurance, the largest private sector life insurance company in India.
While Sharma was with ICICI Bank for almost three decades, she was reportedly looking for an outside opportunity ever since one of her erstwhile colleagues was cherry picked by the bank to succeed KV Kamath as MD and CEO of the bank.
But why did the spat break out. To his credit, Nayak has, however, now wished Sharma well in a conversation with FE. Nayak?s opposition to the appointment of Sharma was rejected by the board ? which included representatives of the government and other shareholders by a majority of 8:1. No one supported Nayak in the board. While reports said Nayak had thrown his weight for Hemendra Kaul, currently executive director in charge of retail operations for the CEO slot, but that is not correct. Nayak had not put up any prospective candidate to take over the baton from him. Let alone an insider. All the three names considered by the board were outsiders, including that of Sharma. This is what Nayak objected to. The names had been put up by the selection committee set up from within the board earlier.
Nayak had recused himself from the committee in the interests of objective selection. He was not therefore in the running for another term.
Following the anointment of Sharma, Nayak apparently wrote a four-page letter to the Reserve Bank of India reiterating his opposition to the bringing in of an outside candidate for the bank.
As soon as the board met in the afternoon after passing the audited results in the morning, he wasted no time in putting in his papers, thereby hanging up his boots three months ahead of schedule. And that is what makes the situation tricky. Despite its sterling performance ? for the year ended March 31, 2009, the bank posted a net profit of Rs 1,815 crore compared to the net profit of Rs 1,071 crore for the previous year, a growth of 69% ? Axis Bank will find itself without a head at a time when the entire financial sector is in turmoil and is looking at the government for measures to shore up consumer confidence.
?It wouldn?t be proper for me to speak on the Axis Bank succession issue,? he told FE. ?It is now a done deal; the bank must move on, and it is important that my successor wins the support and confidence of my former colleagues,? he added with characteristic nonchalance.
This tiff with the board is not Nayak?s first. There have been at least two instances when he had a run in with the board since the time he joined UTI Bank Ltd, the former avatar of Axis Bank, in January 2000.
In both the occasions, he offered to resign but was persuaded to stay back.
In the 2002 incident, Nayak went on a month?s leave and refused to resume work till the bank?s board cleared him of an indictment in a draft report of the joint parliamentary committee on the stock scam, which had commented on the UTI Bank?s failed merger with another private bank, Hyderabad-based Global Trust Bank Ltd.
Then, when the Reserve Band of India recommended that UTI Bank separate the positions of chairman and CEO, Nayak went on record saying he would rather quit than settle for a lesser role. It is perhaps these instances that led to the snowballing of the opposition against Nayak.
Of course, this is not to underplay his contribution. But while Nayak remained an integral part of India?s banking for a decade-and-a-half, he was not a banker by choice. He started his career as a civil servant (Indian Administrative Service), and plunged headlong into banking when he joined the erstwhile Unit Trust of India, the country?s oldest mutual fund and the then largest capital market player, as an executive trustee. In a few years he moved on to don the mantle of UTI Bank chief.
He was a prime mover behind rebranding UTI Bank as Axis Bank two years ago after it refused to pay royalty to UTI. In fact, it is under Nayak?s stewardship that Axis Bank has grown to what it is today. Twice it was named the best private sector bank in India by FE. Nayak would also take pride in the fact that during his nine years at Axis Bank, no senior colleague except two had left the bank.
Now that Nayak has decided to leave before time, his successor, Shikha Sharma will have her task cut out.