At a broader level, this episode at ICICI Bank is evidence that the boards of even so-called ‘professional’ companies, or those that are not run by business families, aren’t exactly top grade.
Given how Justice BN Srikrishna’s report has found Chanda Kochhar of violating ICICI Bank’s code of conduct, it would seem the lender’s board was a little too hasty on giving her a clean chit. It needed to have waited for an independent enquiry to look into the issue before rushing to exonerate the former MD & CEO. So if Kochhar’s career has ended on an inglorious note, the board hasn’t exactly covered itself with glory.
At a broader level, this episode at ICICI Bank is evidence that the boards of even so-called ‘professional’ companies, or those that are not run by business families, aren’t exactly top grade. Kochhar appears to have acquired tremendous clout, so much so that she held her ground and was most reluctant to go when the allegations relating to inadequate disclosures on her husband’s dealings with the Videocon group surfaced. Indeed, the board should have insisted she step down immediately and called for an independent probe into the matter immediately. It was only after the ICICI Bank stock tanked and investors expressed their concern that the board showed some urgency. Apart from hurting investors, the board’s pussyfooting and treating Kochhar with kid gloves has hurt its reputation.
However, after the submission of the Srikrishna report, the board has now said it would terminate her services and will also take back a significant chunk of her remuneration over the past ten years. So, while the CBI case against Kochhar and others is likely to take a decade or two before the final verdict—after being challenged in various courts—is delivered, the ICICI board’s actions have ensured that Kochhar pays an immediate and heavy price for her actions.
Indeed, while some have criticised Union finance minister Arun Jaitley’s comments on the CBI case, in the light of the Justice Srikrishna report on Kochhar, Jaitley was also making the same point about the need to hurry along the case; as he argued, by including Kochhar’s predecessor and successor in the FIR, the CBI was making the case more open-ended. Indeed, once the sanctity of the loan process was questioned, there was also the danger of other banks like SBI getting dragged into the mess.
It is unfortunate that episodes like the one at ICICI Bank take place despite so much talk about corporate governance and reforming of corporate boardrooms. Indeed, the former chief executive of the National Stock Exchange, too, is being investigated for a breach of the rules. The Kotak Committee’s recommendations of increasing the number of independent directors in a year, capping the directorships that an individual can hold and increasing the number of board meetings are aimed at functioning of boards. But unless independent directors step up to the plate, it is hard to see any significant improvement taking place.