Kochhar probe can help ICICI clean up the system
This is the ideal opportunity for the bank’s board to lay down standards of governance and enhance credibility
An Urdu maxim sums it up the best: Der aaye durust aaye. What should have been the obvious course of action took the ICICI board three months to execute after enormous public pressure – and that too grudgingly, it would seem. While the board has ticked all the boxes, it is the perception of the real intent of this move that still lacks clarity. Post the highly misguided board presser in March, expressing prematurely an unstinted support for Chanda Kochhar, the board had an excellent opportunity to redeem itself. This time, it ensured a fully independent enquiry on not only the strictly legal aspects of this issue but also on the principles of ethical governance and leadership; and more importantly its place in the significantly eroded contemporary governance framework of the bank.
For this to happen in the public perception, the board was required to appoint a credible face, issue an iron clad mandate and demonstrate visibly the will to go through with the detailed investigation. I have argued publicly that it is highly unlikely that Kochhar’s indiscretions of this magnitude could have been carried out in isolation with such impunity over years, especially the brazenness with which restructuring deals were struck by her brother-in-law in the full glare of the bank’s executive management and the board. This raises the more serious question of management culture within the bank with regard to the “chalta hai” attitude of dipping into the pot as being within the realms of feasibility. The culture of an organisation reflects the thinking of its leadership, which then gets perceived by employees over time, moulded by the day to day behaviour of the operating management in its responses to situations on the ground. This legitimate doubt of investors and depositors can only be clarified conclusively by this investigation provided the board dem- onstrates the will to clean things up. This, to my mind, is at the core of what the board should focus on .
While Justice Srikrishna’s appointment to probe the charges is impeccable, the messaging of the board’s announcement last evening is ambiguous at best, and is crafted to keep the balance of power with Kochhar . The charitable interpretation, however, is that of providing a facesaver to Kochhar and ensuring stability, but doubts will persist if we are witnessing again a replay of the age old Indian model of obfuscation to provide exits to powerful interests when confronted with a public outcry. Given the well honed Indian model of clinging on till proven guilty in a court of law after decades of legal wrangling, it is quite possible that Sandeep Bakshi will be elevated to the CEO’s slot only after Chanda Kochhar’s term expires in June 2019. Till then, her omnipresence would ensure a cloud over the bank’s investigative capability to respond with appropriate clarity to Justice Srikrishna during the course of his investigation.
The tone for management culture and governance is set from the top, and there can be no two opinions that it has been significantly eroded by this episode and its subsequent handling by the bank. If the board had decided to make a clean break from the past instead of opting for this hybrid structure – and thereby ensuring Kochhar retains control without being in the public domain – it could have set the tone for a resurgent future at the bank. After all, boards are differentiated only by its collective capability to make proper judgments as things unfold, and that is where it has not distinguished itself so far. Given the standing of ICICI Bank in our corporate hierarchy, this would have been the ideal opportunity for the board to lay the standards of governance and clean up a badly broken system.
Now the minority shareholder, the depositor, and the general public will only have to depend on Justice Srikrishna’s ability to navigate through the cobwebs in this corporate labyrinth, much akin to the mythical Bhool Bhulaiyaa of the medieval times. Prabal Basu Roy is a Sloan Fellow from the London Business School, a corporate advisor, an author and former director and Group CFO in various companies The views expressed are personal