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The government’s decision to fill the whole time directors position including that of CMD / CEO / Managing Director (MD) positions in PSU Insurance companies and the State Bank of India (SBI) through open market recruitment marks a significant shift in the management approach of public sector institutions. It signals a desire to bring in private sector dynamism and fresh perspectives into long-established state-owned financial entities. However, this decision has sparked a deeper debate on whether such lateral inductions can genuinely strengthen public institutions or disrupt their intrinsic ethos. Public Sector Undertakings (PSUs) likes of LIC and SBI operate within a framework that emphasizes stability, continuity, and collective decision-making. Over the decades, these institutions have evolved processes that prioritize systemic robustness over individual leadership styles. Decision-making in such organizations is shaped more by institutional norms and regulatory frameworks than by the personal vision of the person at the top. In contrast, the private sector is driven by individual leadership, rapid change, and performance-based accountability. The chief executive’s goals and deliverables — often tied to market valuation and shareholder expectations — define the operational focus. This difference in orientation means that a lateral entrant from the private sector may face fundamental challenges in navigating a system where decisions are subject to layered approvals, procedural checks, and collective accountability. PSU mechanisms Public sector management operates under multiple layers of oversight and audit, including mechanisms from the Comptroller and Auditor General (CAG), Central Vigilance Commission (CVC), and internal compliance frameworks. These structures ensure transparency and accountability but also limit the managerial freedom enjoyed by private corporations. In private entities, restructuring or closure of business verticals can happen swiftly to align with profitability goals. In PSUs, however, personnel and policy decisions are bound by statutory and procedural obligations. Such rigidity, while often criticized, also provides a safeguard against arbitrariness and ensures long-term institutional stability. Wlefare objective A defining characteristic of PSUs is their orientation towards public welfare and nation-building. Although they are expected to be self-sustaining businesses, their operations are closely aligned with broader social objectives — from financial inclusion to implementation of welfare schemes. Employees across these institutions often internalize a strong sense of duty toward fairness, ethics, and customer centricity, particularly in sensitive functions such as claim settlements and lending in remote areas. This culture of public responsibility over profit maximization is deeply ingrained. A leadership approach focused solely on efficiency or profitability may inadvertently conflict with these values. The integration of a leader from a fundamentally different work culture poses challenges of alignment and acceptance. Lateral entrants may find it difficult to adapt to the slower pace of bureaucratic processes or to win the trust of long-serving officers who have grown within the system. At the same time, internal officers may perceive such appointments as a breach of the promotion ladder, dampening morale among senior executives who have spent decades preparing for leadership roles. The resultant friction can limit the effectiveness of the new appointee and delay institutional adaptation. Moreover, since such appointments are typically for fixed terms, ownership and continuity become legitimate concerns. Without long-term commitment or deep-rooted institutional belonging, strategic initiatives may not sustain beyond the individual’s tenure. Impact of disruptions PSUs are built on inclusive decision-making and procedural integrity. Sudden changes in leadership approach — especially those imported from corporate cultures valuing rapid decisions and top-down execution — may unsettle this equilibrium. Lateral entrants, even with the best intentions, might inadvertently relax established controls or override internal checks, exposing the organization to compliance risks in the long run. Given these cultural and systemic differences, the debate extends beyond individual competence. It questions whether public sector entities can or should be reshaped in the image of private enterprises, or whether they require a separate reform path that strengthens their public mandate while modernizing their operations. India’s experience with lateral entries in economic and regulatory institutions offers mixed outcomes. Initiatives in financial regulators and public enterprises have often encountered resistance, operational disconnects, or short-lived results. The intended infusion of innovation and efficiency frequently clashed with institutional inertia and value conflicts. These outcomes underline a key lesson — transplanting private-sector models into public-sector structures without systemic adaptation rarely delivers sustained results. Effective reform requires not only new leadership but also re-engineered governance frameworks, clarity of accountability, and organizational readiness for change. Structural reform Lateral entry, in principle, is not without merit. It can bring fresh thinking, contemporary management practices, and exposure to global trends. However, for such reform to succeed, intent, design, and execution must be carefully aligned. The objective should not be cosmetic — to signal modernization or please markets — but structural, aimed at building long-term institutional capacity. The government’s role, therefore, must evolve from that of a direct controller to a trustee and enabler. Public sector institutions thrive when they are empowered with autonomy, stability, and clarity of mission. The strength of India’s financial ecosystem rests on institutions like LIC and SBI that have combined profitability with public purpose over decades. Any reform must reinforce this legacy rather than disrupt it. Lateral entry may well be part of the answer — but only when integrated thoughtfully within the unique culture, accountability, and social responsibility that define India’s public financial institutions. The writer is Associate Professor , BIMTECH. Prof. Pandey has long working experience in LIC. Views expressed are personal Published on November 2, 2025
