Axis Bank: The Succession Planning Fiasco

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Background Note The Axis Bank was one of the first private sector banks which were set up after the reforms in the banking sector in India in the early 1990s (Refer to Exhibit I for a brief note on reforms in the Indian banking sector)... Nayak's Reign at Axis Bank Nayak, a doctorate degree holder from Cambridge University, had served as an Indian Administrative Service (IAS) officer before coming to Axis Bank (Refer to Exhibit V for a brief profile of Nayak). On January 1, 2000, he took over the position of CMD of Axis Bank from Supriya Gupta (Gupta)...

On December 15, 2004, the board of Axis Bank decided to split the posts of CMD to comply with the RBI ruling. The directive passed by the RBI after a recommendation of a panel set up in 2002 under A S Ganguly, former chairman, Hindustan Unilever Limited , required dividing of top posts in all large banks in order to ensure better corporate governance...

In his second term with the bank, Nayak planned to grow the bank through organic growth. According to Nayak, "Right now, we are only looking at organic growth. The bank has been growing at the rate of 35-40 per cent over the past five years. There is no need for us to look at inorganic growth, unless our current business model fails."...

After receiving flak from several quarters, the board decided to instruct Nayak to develop a second line of leadership - his successor who would lead Axis Bank after his retirement. Experts felt that this issue was of critical importance as by the time Nayak's tenure expired, some of the senior executives in the bank, including Agarwal, Kumar, and Ramani would be close to their retirement...

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