Equity Bank grooms possible James Mwangi’s replacement

NAIROBI: In March, during the release of Equity Bank’s quarterly results, a shareholder asked if the company had a backup plan were long-serving CEO James Mwangi to leave.

Yes indeed, responded Mr Mwangi, who was on the podium.

It was an important question for an investor interested in business continuity, for when one mentions Equity Bank, Mwangi quickly comes to mind.

The CEO has dominated the banking sector locally and far beyond the country’s borders. He has been credited with transforming a once struggling building society into a regional behemoth.

And with the bank on an expansion spree that is expected to see it enter 10 new markets by 2025, there have been concerns that the institution might not cope in the absence of Mwangi.

Speaking at an annual general meeting last year when he announced he would be serving as CEO for another 10 years before retiring, Mwangi admitted he wanted the regional expansion to be his legacy.

And after 26 years at the bank, expected to rise to 35 years by the time of his retirement, it is no wonder that to many people, Mwangi has become synonymous with Equity Bank.

POPULAR OPINION

However, the bank has said it has a succession plan, the details of which it prefers to keep secret.

“The board has discussed Dr Mwangi’s succession. We have plans — both short-term if he is hit by a bus, and long-term. But we don’t anticipate he’ll leave any time soon if he is in good health,” said David Ansell, a director at Equity Group Holdings.

Mr Ansell, who has served as president of Citibank Russia among other high-ranking positions in the global banking sector, said contrary to popular opinion about Mwangi’s sway at the bank, the power to make decisions is vested in various committees.

They comprise competent members who make decisions on behalf of the bank, he said.

Still, Mwangi’s perceived dominance has raised the critical question of succession in corporate Kenya, especially when the incumbent CEO seems to be behind a company’s success and image.

Governance and human resources experts say some local business leaders are so influential that no amount of succession planning would ensure a seamless transition.

In such cases, it is difficult to prepare a successor because the incumbent may be larger than life and the next person is not likely to measure up. Nonetheless, they say, companies need to have a plan in place for business continuity.

“The board has extended my tenure to be CEO, but that doesn’t mean the bank doesn’t have a succession plan,” Mwangi told Business Beat.

“We have headhunted some of the best brains in the global banking circles and they are all here at Equity. There are more than 10 people currently working within the bank who are capable of taking over from me.”

THE SHORTLIST

One of those mentioned by Mwangi as his potential successors is Bhartesh Shah, who is currently Equity Bank’s chief operations officer.

Mr Shah previously worked for Midland Bank (HSBC) in the UK, and has served in various senior roles at Standard Chartered Bank in Kenya, Botswana and Singapore.

John Staley, who was CEO at Credit Indemnity (Pty) Ltd in South Africa before joining Equity as chief officer of finance, innovation and payments, also made it to Mwangi’s shortlist of potential successors, as did Harvard-trained Jumaane Tafawa. He works as the bank’s director for strategic partnerships and programme management.

Others mentioned were Rohit Kumar, the bank’s chief officer in charge of corporate and SME banking, Ronald Webb (group director of payments), and Anthony Emeka Ogbechie (group finance director), who Mwangi poached from Credit Suisse Investment Bank, London, where he was working in strategic finance transformation.

“We have put a succession-planning process in place. It is simply one element of good business. Aside from the obvious preventative aspect, it also helps keep the board and my executive team aligned with our overall strategy and common goals, while bringing us peace of mind,” said Mwangi.

Most large firms plan for seamless succession of the CEO by grooming key personnel at the executive level many years in advance. This, according to Mwangi, is part of his job as CEO — managing risk for his organisation.

Succession planning has, however, proved a particularly thorny corporate governance challenge, especially for big organisations.

The curious case of Microsoft is one example of succession planning gone wrong. The assumption was that Steve Ballmer, generally viewed as the natural successor to Bill Gates because of their long association, would be the right individual for the job after Mr Gates stepped down as CEO.

Yet, after Gates’ exit, the transition did not go as smoothly as anticipated. While Mr Ballmer appeared qualified, Microsoft and its board did not take into account his different leadership style and how this would affect the entire organisation. While Gates physically embodied the purpose for which he founded Microsoft; Ballmer was not as aware of this vision.

UNITED VISION

By contrast, Apple had what is considered one of the best succession planning among corporates. By the time Steve Jobs was compelled to stand down due to ill health, the company already had a united vision of its future and what was required in terms of a strong cultural fit for the incoming leader.

The result has been that Apple has continued to progress seamlessly even after losing the vital leadership of Mr Jobs.

“Mwangi is a great leader, but what people don’t understand about Equity Bank is that it has structures that dictate how policy issues, including governance and management, are carried out,” said Mr Kumar.

“At Equity, most power is vested in committees, unlike other banks where individuals hold sway.”

Prior to joining Equity Bank in 2014, Kumar held senior management positions at Emirates NBD Bank in Dubai, whose loan book is in excess of $100 billion (Sh10.1 trillion) — Equity Group’s net loan book stands at Sh275 billion. Before NBD, the man credited with growing Equity’s SME portfolio worked at consulting firm McKinsey & Company in New York.

“The reason I agreed to work for Equity is that everything is professionally done. Directors do their work independently without interference from any quarters. I am here because the bank has given me an opportunity to do the right thing and contribute to the socio-economic well-being of Africa,” said Kumar, adding that he is honoured to be considered one of Mwangi’s likely successors.

One of the more public succession fallouts in corporate Kenya was at Tuskys, when the children of the retail chain’s founder ganged up earlier this year to throw out the its first non-family managing director.

A number of similar controversies can be traced to disregard of laws and regulations that entrust recruitment or renewal of CEO tenures to a board.

Equity Bank, said Norfund, one of the biggest investors in the bank, does not have this kind of exposure because it is a global player with very strong management and governance structures that guarantee clear succession rules and good corporate governance.

“One of Dr Mwangi’s great achievements is the creation of a very strong and passionate team that is bound together by a strong sense of purpose and commitment to the fulfillment of the vision of the group. They are supported by strong leadership and technical know-how in their respective areas,” said Deepak Malik. He is the head of department, financial institutions, at Norfund.

Norfund sits in the governance, audit, risk and strategy committees. Mr Malik chairs the strategy committee. The Norwegian investor own 450 million shares in Equity Bank, worth about Sh18 billion.

According to Malik, the bank’s committees hold quarterly meetingswhere the management presents papers for evaluation and discussion.

The board acts on the recommendations of the committees, which hire professional advisers on a need basis to give guidance on technical matters. Each committee is guided by a charter that sets out its mandate.

In most well-performing companies, leaders are determined several years before the incumbent leaves the organisation. The talent pool usually has structures and performance cultures in place.

Organisations that have successfully existed for decades offer good lessons on succession planning. General Electric, with leaders like Jack Welch considered one of the best in US corporates, has found success and transformed over the years to expand and win more customers.

While making every effort to grow the organisation, good leaders must be aware of limitations, such as time — they will not be there forever and have to prepare the organisation for this.

NEW STRUCTURE

Back in March, Mwangi sought to quench shareholders’ curiosity when he said he has been flying the Equity plane with “co-pilots” who are equally or even better able to guide the bank to its destination when their time comes.

Corporate Kenya also offers its share of great lessons on good planning where larger-than-life CEOs are concerned.

Michael Joseph dominated the communications landscape, and it was difficult to imagine Safaricom retaining its trajectory without him. But then Bob Collymore succeeded him and has managed to keep growing the telecoms firm.

At Kenya Commercial Bank, another financial services behemoth, many observers saw a succession plan in the making when Martin Oduor-Otieno was appointed deputy CEO in 2005. He was plucked from a plum job at Barclays Bank’s regional office in South Africa and had to fight it out with other contenders to succeed Terry Davidson.

After taking over the mantle at KCB, Mr Oduor-Otieno established a new corporate structure where he sat as chief executive, with three assistants. He once said during an interview that his responsibility was to make sure there was a pool of candidates within the bank who could take up the leadership mantle from him or any other senior director.

Strategy experts say there is no good time for a CEO to leave an organisation, but plans should always be in place that will ease transition. So, at any time, an organisation should have two or three deputies being groomed to take over should a CEO step down for whatever reason to avoid being caught unprepared.

lmukunga@standardmedia.co.ke