Finally, the deed is signed. In May 2009, Chanda Kochhar will step into the corner office on the 10th floor of ICICI Towers in Bandra-Kurla Complex, a Mumbai suburb, to take over what is inarguably one of the biggest banking and finance jobs in the country. K V Kamath, its current occupant, will move across the hall to the office now used by his boss and mentor, N Vaghul.
When the decision was made public last Thursday, it almost seemed anti-climactic. The matter-of-fact tone which Kamath and Kochhar deployed to address the media belied the drama and suspense that marked one of the most closely watched CEO succession stories in recent history. For almost two years, Indian media has given it a billing of the kind usually reserved for similar events at marquee global firms like GE—or closer home, Hindustan Unilever (HUL).
The six heavyweights on the ICICI board—Chairman Vaghul, CEO & MD Kamath and independent directors Tinoo Puri (also a McKinsey director), M.K. Sharma (HUL legal eagle and former vice-chairman), Prof Marti Subrahmanyam (Charles E Merrill Professor of Finance and Economics at Stern School of Business, New York University) and P M Sinha (former Pepsico India chairman)- can now sigh with relief. Over the last two years, they had discussed, debated and pored over an impressive list of internal candidates, and a few from the outside. And yet, until the very end, a series of extraordinary events tested the board.
As the succession drama moved into its last lap, the global financial meltdown triggered stories of how susceptible ICICI Bank really is to the crisis. That, in turn, stoked a brief run on deposits at the bank. Worried investors wanted to know why Kamath had to exit at this hour. This was the biggest crisis the bank had seen since 2006 when it had a run-in with banking regulators in Hong Kong over permissions to sell securities.
The concern was understandable. “In a period of uncertainty and change, the impact that an individual leader has on a company can be very significant. So if the board of directors picks a wrong CEO, it could be very bad for the company,” says Professor Michael Useem, director of Center for Leadership and Change Management at the Wharton University of Pennsylvania. “The right successor can make a big difference in giving the company the vision, verve and energy for taking on for the next 5-10 years. So as the board, the person you pick as the incumbent CEO is going to affect the company for the next decade or so,” he adds.
What most investors did not know then was that almost a year earlier, Kamath had made it clear he wasn’t interested in staying on. At 61, he wanted to spend more time with his family and there was no way that he would accept another term. The board had to find a replacement - even if that evoked adverse reactions from investors.
On November 24, when the entire board assembled to arrive at a final decision, the crisis at Citibank was raging. The possibility of the world’s biggest commercial bank going under had spooked the global investor community. It wasn’t the opportune moment to make their decision public. So the board decided to buy some more time, a few weeks at least.
Meanwhile, there was intense speculation in media and banking circles about who would eventually be crowned Kamath’s successor. Sources in the board confirm that there was some talk of external candidates, but they declined to name who the contenders were. Forbes-Network18 learns that the name of Aditya Puri, managing director of arch-rival HDFC Bank, did come up. But whether or not Puri stood a chance could not be independently confirmed. Perhaps, the fact that ICICI has a strong leadership bench from within may have dissuaded the board.
“In large, complex organisations, knowledge of the ethos, internal processes and the people is very important," says Marti Subrahmanyam. "Often, it takes a newcomer a long time to understand them. Hence, in cases where there is large pool of talent available internally, my own bias is towards using internal people. Besides, there is another danger in going outside: no matter how hard you try, you always have less information on external candidates. So there is always an element of risk in a lateral movement, especially at the top.”
But for those in the know, there never was much doubt on who would get the nod, despite the impressive array of candidates. There weren’t too many candidates who could match up to Kochhar. Nachiket Mor, known to be Vaghul’s blue-eyed boy, unexpectedly dropped out of the race in October 2007 and chose to move to ICICI Foundation.
Shikha Sharma, the other formidable contender, had built an awesome reputation as CEO & MD of the life insurance business. But when she was asked to come back to ICICI Bank two years ago, she seemed reluctant. That, sources say, may have been a tactical mistake that cost her the top job. By the time the board drafted her into the shortlist of the final two, Kochhar was firmly in the saddle at the bank and cantered home in the last lap of the race.
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