Heads of investor advisory firms said the board of Axis Bank Ltd. has only added to confusion and raised more questions by allowing Managing Director and Chief Executive Officer Shikha Sharma to continue even if it’s for a much shorter fresh term.
The Reserve Bank of India has not approved the first extension sought in July last year, and today’s statement has confused the matter even more, Anil Singhvi, founder of shareholder advisory firm IiAS, told BloombergQuint in an interview. “Are we taking the regulator for a ride that since three years was not acceptable, allow us for six months?”
The board last year reappointed Sharma for three years starting June 2018 when her current term ends. It, however, informed exchanges today that Sharma wanted to exit in December this year and the board has accepted her request to cut short her fresh term by about two-and-a-half years.
That comes after The Economic Times reported that the RBI had sent queries to the board on its decision to reappoint Sharma. In a statement to stock exchanges, the bank had said the board forwards its recommendations to the regulator as required and added that the “process is currently in progress”.
The entire episode raises many questions especially on the board, JN Gupta, founder at Stakeholder Empowerment Services, said. If the board had in December thought that Sharma is a good performer, and should continue for four more years, “there is no reason that after three months, when the RBI points out something, agree to this [cutting short her term] and let her go.” This situation, he said, indicates a fault in the evaluation system.
Singhvi questioned that when Axis Bank board’s decision to give her a three-year extension was not approved by the central bank, what’s the rationale for giving her another six months. “Assuming the decision has been made for a smooth transition for a new CEO, it would have been wiser for the board at the same breath to announce that this is what we are doing to search for a new CEO once again.”
The board is failing in their duty to inform investors. It is not the stock exchanges alone that you write three lines on that. You explain it to them [investors] what went wrong last year.Anil Singhvi, Founder, IiAS