One of the country’s leading banking institution Yes Bank touched their two and a-half year low levels on friday, before ending over 9 per cent lower, amid uncertainty around the tenure of the lender’s CEO, Rana Kapoor.
A research made by RBI states that the company lost $2.95 billion of its market value last friday which is creating doubts in the mind of the investors.
On Friday, Yes Bank shares touched their fresh 52-week low of Rs. 166.15 in intraday trade on the Bombay Stock Exchange (BSE), before closing at Rs. 183.45, down Rs. 19.75 or 9.72 per cent. On the National Stock Exchange (NSE), Yes Bank shares hit a 52-week low of Rs. 165, before ending at Rs. 184.10, with a loss of Rs. 19.15 or 9.42 per cent.
The conflict between Yes Bank’s promoters began in 2009, a year after co-founder Ashok Kapur was killed in the 2008 terrorist attack in Mumbai.
The board declined to appoint Shagun Gogia, daughter of Ashok Kapur, because it was felt she might not meet RBI’s fit-and-proper criteria. In 2013, Madhu Kapur (widow of Ashok Kapur) and her daughter Shagun Gogia approached the Bombay high court seeking greater say in appointing directors and wanted the court to uphold their right to jointly nominate directors.
In June 2015, a single bench of the Bombay high court ruled that both promoters must follow the articles of association . However, both Kapur and the bank have challenged the ruling before a division bench. On Thursday the board would look for a successor and it does not require the approval of the promoters. However, if the board finds a successor to Rana Kapoor after appointing a search committee, it will nevertheless, have to seek approval of RBI before appointing the candidate.
She added that promoters can jointly suggest a successor but that too will need RBI approval. “In case Yes Bank wants to appoint a whole-time director, joint approval of the promoters will be required,” she said.
As of end-June, Mr Kapoor had a direct 4.3 per cent stake in Yes Bank, according to Thomson Reuters Eikon data.
This week Yes Bank has requested the Reserve Bank Of India for an extension till 31st January 2019.
Yes bank has now appointed US Based advisory firm Korn Ferry to assist the bank’s, search and selection committee in finding a successor to the MD/CEO Rana Kapoor.
In order to ensure a smooth functioning when an incumbent leader moves out the board of directors of a company should involve itself in the choice of the chief executive officer and the top management. The experience of the Tata group and Infosys to find successors for Ratan Tata and N R Narayana Murthy shows these inadequacies. It also shows that a full-time internal claimant is better than an outsider. Also, the text book idea of an understudy, for say, at least three months before the retirement of the incumbent is worth considering.
- Adit Jhadav
The Endeavour Editorial Club 