It is Uday Kotak’s swan song year as chief executive officer of Kotak Mahindra Bank (KMB), and the theme of the bank’s FY2023 annual report is “Acceler@ting Change”. In line with this, the bank’s “strategy emphasises on building younger [italics ours], diverse and future-fit talent at the Group.” Perhaps this explains how Jay Kotak pole-vaulted to become joint head of the bank’s 811 initiative at the tender age of 32.
Junior apart, the bank does indeed need a young, committed workforce to manage operations and deliver on its ambitious growth strategy. A casual reader of KMB’s annual report might assume that such a workforce is in place: KMB proudly displays, among its awards, the “Employee Excellence Award 2022” at the Economic Times Excellence Summit. It claims that four out of five employees find the bank a “great place to work”.
In October 2017, as chairman of the Committee on Corporate Governance, Uday Kotak had highlighted the two styles of corporate management in India – the “Raja” (Monarch) model, where promoter interest precedes the interest of other stakeholders (Praja); and the “Custodian” (Trusteeship) model, which corporate India needs to imbibe, and where the board of directors act in the interests of all stakeholders (shareholders, employees, staff et al). Presumably, Uday Kotak believes that, even though he is the “Raja” of the bank which bears his family name, the board of directors at KMB practises the “Custodian” model.
It is hardly a sign of good governance that, not only is the attrition of KMB’s employees galloping, but the board of directors under the chairmanship of Prakash Apte, and the executive leadership of Uday Kotak and Dipak Gupta, are unwilling to even acknowledge it to their shareholders.
Perusing KMB’s FY2023 annual report, the reader might be seduced by the bank’s overt commitment to its employees. For example, a survey reveals that 79% of employees believe the bank is “a Great Place to Work” (up from 77% in the previous year). Shareholders are also educated on “Drona”, the bank’s “flagship managerial capability development programme” to assess a manager as an assessor, trainer, mentor and coach.
KMB’s public commentary to non-discerning shareholders paints a picture of employee contentment and loyalty to the bank. Its reporting of the “Drona” programme suggests that youngsters are likely to pursue long-term careers in the bank.
The facts speak otherwise. KMB’s disclosures on attrition in the under-30 years category and in the category of junior employees (there are overlaps between the two categories) reveal that attrition in junior employees in FY2023 is 51%, and in the under-30 years category, it is at an even more shocking 58.2%. It is worth recalling that, in the Mahabharata, Drona demands and receives the thumb of his disciple Ekalavya as Guru Dakshina. Perhaps the present generation of Ekalavyas at KMB prefer to quit their jobs instead.
KMB has richly rewarded equity shareholders since its listing, and Uday Kotak as promoter-CEO deserves considerable credit for this accomplishment. As he steps down from his executive role in the bank he founded and nurtured, the board of directors must review the attrition, as employees are also important stakeholders in the bank. The negligible presence of employee unions and officer associations in KMB where only 2.7% of the employees are members may possibly explain the high attrition at the lower levels. Uday Kotak’s core senior executive team has remained loyal, but a bank cannot be managed by having a stable senior executive team while at lower levels every second employee will have fled by the year-end. Such a high attrition, even at lower levels, is disruptive to operations, customer service and to training and hiring costs and the board either needs to be revamped or devote considerable efforts to lower the attrition. KMB’s proud proclamations that it follows the highest standards of corporate governance, transparency and accountability, carries little credibility when its board remains mum about such massive employee flux. The issue requires intervention by the regulator before a major disruption occurs in the bank.
Note: A questionnaire was sent to Kotak Mahindra Bank on 16th July but despite reminders the bank declined to respond.
An edited version of this article was published by The Wire and can be read here.
I, Hemindra Hazari, am a Securities and Exchange Board of India (SEBI) registered independent research analyst (Regd. No. INH000000594). I own equity shares in all the banks mentioned in this report. HDFC Bank subscribes to this analyst’s research and a member of this analyst’s family is employed with HDFC Bank. Views expressed in this Insight accurately reflect my personal opinion about the referenced securities and issuers and/or other subject matter as appropriate. This Insight does not contain and is not based on any non-public, material information. To the best of my knowledge, the views expressed in this Insight comply with Indian law as well as applicable law in the country from which it is posted. I have not been commissioned to write this Insight or hold any specific opinion on the securities referenced therein. This Insight is for informational purposes only and is not intended to provide financial, investment or other professional advice. It should not be construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any security.
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