At a time when India’s top business house Tatas has begun the search for successor to its chief Ratan Tata, a new survey has found that over 75 per cent of the company boards in India do not even discuss the issue of CEO succession plan.
In comparison, the boards of more than 60 per cent top- ranked companies in the US discuss their CEO succession at least once in a year, while 80 per cent of those companies have already in place an emergency succession plan, a report said.
Quoting a research published by US-based management consultancy Bain & Company, British daily Financial Times reported that “more than 75 per cent of company boards in India do not discuss chief executive succession planning at all.”
The publication of the research coincides with Tata group, one of the largest industrial conglomerates in the country, announcing the setting up of a five-member panel to decide on the successor for Ratan Tata, who has been leading the group since 1991 and retires in December 2012.
“The panel will look at suitable candidates from within the group and professionals from India and overseas to find a replacement for Ratan Tata, who retires at the end of 2012,” the group said in a statement.
The succession issue at the $71-billion Tata group has attracted global attention, as two-thirds of its revenue come from abroad, thanks to its strings of overseas acquisitions over the years, including big-ticket buys like that of Anglo-American steel giant Corus and luxury car maker Jaguar Land Rover.
Noting that Indian business groups were failing to plan for successor, Financial Times report said: “In a country where corporate leaders and politicians enjoy extraordinary professional longevity, lack of succession planning is a key failure of boards at many family-owned businesses in India, leaving them highly vulnerable after the retirement or death of their leaders."
The report said that the prominent family-owned business houses that got afflicted by “messy succession issue” include Reliance, Bajaj, Birla and Ranbaxy groups.
The report said Bain’s research of 44 top Indian firms found that only one in five board members was ever involved in talks about a CEO’s succession and little effort was made at board level to groom top leadership.
“Some family business members delay the process of succession planning as their decisions could create conflicts in family,” FT quoted the report.