Playing favourites

Public-sector banks need policy framework for top jobs

The government has tweaked the eligibility rules for those aspiring to the posts of chairman-cum-managing director (CMD) and executive director (ED) of nationalised banks. There’s nothing wrong with that since these rules are arbitrary beyond a point. But look at the nature of changes made. You need to have at least 18 months of residual service – and not two years, which was the rule last year – to be considered for the post of CMD. But in the case of EDs, there has been no such change. Why is it that what is good for CMDs is not good for EDs? The absence of a rational explanation will give the impression that such tinkering is aimed at accommodating one or more candidates with high-powered connections. The last thing a government that is under a cloud over pervasive corruption should do is give cause for speculative allegations to be made, particularly when public-sector banking circles have long lived with the notion that large corporate borrowers with political clout make good godfathers for top management aspirants.

In fact, there is every reason to raise, not lower, the period of residual service left for an aspirant to be in the running. No leader can make a mark in less than three to five years in an organisation and the best-run private- sector organisations typically have CEOs who serve for five years or more. Having a three-year cut-off will be unkind to many managers who have served the sector well in careers spanning decades but frequent changes at the top of an organisation can only do it serious harm. And if there is anything worse than tinkering with the cut-off, it is the failure to fill a top post in time and allowing it to remain vacant – as is the case with one bank at present. This can cause serious damage to the direction and morale of the organisation. What the government urgently needs to do if it wants to win back a certain degree of public faith in its ability to govern is publish a discussion paper on the policy for selecting top public-sector positions. The paper must pay attention to smooth succession, reasonable tenure and the nurturing of organisational ethos. Exceptions will need to be made – say, when a particularly capable manager has less than three years to go – but they should not become the rule, and a public explanation should be given every time an exception is made.

An appropriate management policy for public-sector institutions has to balance between two seemingly opposing considerations. Organisations should develop their individual ethos, a strong management cadre and the certainty among all bright people that they have an equal right to go up to the top if merit and health or age permit. Simultaneously, there should be a small quota, say 20 per cent, for lateral entries — the controlled induction of talent will prevent the development of a closed shop and, thus, discourage complacency and cronyism. Perhaps the worst of all possible worlds is what currently prevails among nationalised banks — a game of musical chairs is conducted by the government, in which EDs and CMDs are periodically switched around so that it is impossible to figure out if a bank is doing well or not because of those who lead it.