Ravi Krishnan
Chanda Kochhar stepping aside temporarily at ICICI Bank is a step in the right direction. Now, the board should go. It has failed in its institutional duty. A new board along with a new acting CEO (essentially, COO Sandeep Bakhshi) should allow the bank to start on a clean slate. They can focus on the bank’s primary business of protecting the interests of depositors and giving returns to shareholders.
Ever since the conflict of interest allegations emerged against Kochhar, the board has acted as if it was the personal defence team of the embattled CEO rather than perform on the behalf of depositors and shareholders.
First, on March 28, a few days after the controversy re-surfaced, the board gave a clean chit to the CEO after “reviewing” internal processes. It did not specify whether Kochhar had flagged the conflict of interest situation. The chairman read out a statement in a press conference and did not take any questions. There were no clarity on what the board did to protect the interests of depositors and shareholders when Arvind Gupta first brought these issues to light in 2016. All the statement said was that as a supervised entity, the bank receives various queries “which are appropriately responded to”.
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Second, the board exhibited great reluctance in setting up an external probe. After much hemming and hawing, it announced an independent probe on May 30. The board’s hand was forced by the Securities and Exchange Board of India that sent the bank a notice a week earlier seeking information on its dealings with Videocon and similarly, between Videocon and NuPower where Deepak Kochhar, Chanda’s husband, had economic interests.
Third, at the time of announcing the external probe, the board could very well have demanded that the CEO go on leave until investigations were over; but its reluctance to ask for that (at least according to public information) shows it in poor light.
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This sequence of events point to the fact that the board seems to have forgotten its primary responsibility. Perhaps, the board has forgotten that it has to set the “tone at the top”. It has to “oversee management’s implementation…of governance framework and corporate culture,” says the Basel committee on banking supervision’s guidelines on corporate governance principles for banks.
To be sure, the board was not alone in cutting a sorry figure in this saga. Other stakeholders are equally culpable. The CEO could very well have said much earlier that she would step down while an independent probe exonerates her (there is the precedent; PJ Nayak at the then UTI Bank did so in 2001 and was later reinstated). The government nominees on the ICICI Bank board have kept mum. So has the Reserve Bank of India. If it did conduct a probe in 2016, why didn’t it make the findings public when the case blew up? What other steps has it taken? The silence is deafening, especially since ICICI is a systemically important financial institution.
Be that as it may, after Kochhar’s going on leave, the honourable thing for the board is to step down and let shareholders elect new members. It may be true that many company boards across India are in essence old boys’ clubs, but the ICICI board can save face by stepping down and showing the way for better corporate governance.
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