Succession Planning: Are there no heirs in apparent?
You don't need to see far as to why Infosys board members would vie for iGate's CEO post
<From IT giant Infosys to political party BJP, succession planning comes a cropper</</p>
Since June began, daily news has become filled with stories about how companies and even a national party like the Bharatiya Janata Party (BJP) is grappling with succession planning. No, we are not talking about small companies here.
They are all giants in their respective sectors – IT bellwether Infosys Technologies, infrastructure major Larsen & Toubro, private sector bank YES Bank, outsourcing firm iGate and investment bank JP Morgan to cite a few. Of course, what has now caught the attention of billions of Indians is the sordid drama playing out at L.K. Advani’s residence. We will come to that later.
From all the news reports, it would seem that either the companies were caught napping or the incumbent had/has a tough fight on his hands. Take the example of Infosys. On June 1, the company announced that Founder & Chairman Emeritus N. R. Narayana Murthy will take over as Executive Chairman. Murthy had retired from all executive roles at the company seven years ago. Not only did this disrupt the succession planning set up by him and the other founders, but he also recruited his son Rohan Murthy as a member of the Chairman’s office. Rohan will be the first family member from the second generation to get involved in its leadership. While many critics panned Murthy for this “nepotism”, others welcomed the decision saying it would restore some of the former glory to the company.
On the other hand, L&T Chairman A. M. Naik has another problem on his hands. At 71, he wants to retire but cannot find a suitable candidate to fill his shoes. “I am slogging, day and night - 18 hours a day still. You think I would be doing it if I could help it?” Naik told Economic Times in an interview. With no near-term successor visible, Naik is a worried man. “If I was running a new economy company, I would have lined up 10 successors without a problem. If I was in charge of a bank, a financial services company, CPG, FMCG, IT...[such companies], there would have been no succession problem. But there are no Indians available [to take on the leadership role] in the entire industry - or anywhere in the world. I gave the last five searches over the last four years to five different firms - without any restrictions - to create a team from any nationality. It is not yet possible.”
With iGate, it’s an entirely different scenario. CEO Phaneesh Murthy was up to his dirty tricks again and is now facing yet another sexual harassment suit – the third in the last 10 years. By sacking Phaneesh Murthy and removing him from the board, iGate has the unenviable task of finding a successor for him. In fact, an ET report said that Infosys board members BG Srinivas and Ashok Vemuri, who are in queue to succeed Chief Executive SD Shibulal when his term ends in early 2015, are learnt to be in serious discussions with a headhunter who has the mandate to find a CEO for iGate Corporation.
At Infosys, Srinivas, 51, is the head of Europe as well as financial services, and Vemuri, 46, heads Americas, manufacturing and engineering services. Along with former chief financial officer V Balakrishnan (he oversees the India business, BPO unit, banking product unit and Lodestone), they are seen as the top contenders to succeed Shibulal. Both the senior executives have been with Infosys since 1999.
The fortunes of Infosys and iGate seem to be inexplicably linked. Phaneesh Murthy is a former Infosys employee and is credited with putting the company on the global map. You don’t need to see far as to why Infosys board members would vie for iGate’s CEO post. With Rohan Murthy’s entry, the CEO’s post in Infosys would seem like a distant dream.
India is now witnessing its own boardroom drama after the one that played out at global investment bank JP Morgan. At JP Morgan, its outspoken chairman and chief executive Jamie Dimon won a vote of confidence as shareholders recommended that he keep the title. This took place even as investors pressed for Dimon to be stripped of his chairman title and said they believed they lost because of the chief executive's hints he would quit if he did not win the vote.
Back home, private sector lender YES Bank is the throes of a dispute between the Kapurs and the Kapoors on nominating people to the board. While the late Kapur's family insists on its rights to be equal partner, CEO Rana Kapoor, insists all actions of the board will be in the best interests of the bank and in line with regulations even if it means ruling out his daughter's future at the bank he founded.
The bank's board will meet this month to consider nominating Shagun Gogia, the daughter of late Ashok Kapur, following the Bombay High Court's direction to do so by June 27, after its nomination of three members was challenged by Madhu Kapur, the widow of Ashok Kapur, a co-founder of YES Bank who was killed in the 2008 Mumbai terror attacks. Kapur owns 12 per cent stake in the bank.
The political storm that had been brewing over the past two weeks was finally unleashed yesterday evening. BJP patriarch L. K. Advani decided to quit from all the executive posts he held in the party after voicing reservations about the direction in which the principal opposition party was headed. This happened a day after Gujarat Chief Minister Narendra Modi was picked to lead the BJP’s campaign in the 2014 general elections.
Though the parliamentary board of the BJP said it was rejecting Advani’s resignation, he seems to be in no mood to budge. However, experts say that with Advani gone, Modi will no longer have the problem of dealing with a party patriarch who does not like him. BJP would much rather prefer a hiccup now than be felt wanting at the 2014 elections.
One would assume that once a chief executive hits a plateau, they would make way for the younger generation. Narayana Murthy has often referred to Infosys as his third child. So for him to make a comeback at the company seemed warranted given the fact that it was fast losing ground to Cognizant and also that the company does not seem to have made any succession plan despite its governance model. But, for Advani to throw a tantrum at a time when BJP definitely seemed to be split in the middle about Modi’s endorsement, it did not augur well either for the party or for him. In the end, the Bhishma Pitamah of India’s right wing movement eased himself into irrelevance.
So, the bigger question is why are so many companies found wanting in succession planning? Watch out this space for more on this…