Great power, greater re­spon­si­bil­ity

What can we learn from Chanda Kochhar’s fall from grace?

The Hindu - - EDGE - VENKATESH VARADACHARI

Last month, the board of di­rec­tors of ICICI Bank de­cided to claw back the bonuses paid to Chanda Kochhar from April 2009 till March 2018.

As en­thu­si­asts of all things re­lated to money, what can we learn from this episode? Be­fore we an­a­lyse this is­sue, here is a bit of back­ground for those of you not fol­low­ing the cor­po­rate gov­er­nance chal­lenges of ICICI Bank. Chanda Kochhar was the CEO of ICICI Bank from 2009 till 2018, when she stepped down amidst al­le­ga­tions of nepo­tism.

She was a part of the credit com­mit­tee that ap­proved a ₹ 3,250 crore loan to Video­con group. There were busi­ness deal­ings be­tween Chanda’s hus­band and Venu­gopal Dhoot, the chair­man of Video­con group. The credit com­mit­tee was not chaired by Chanda and there were also other se­nior ex­ec­u­tives as part of the com­mit­tee. So, what ex­actly was Chanda’s fault as the then CEO of ICICI Bank?

To an­swer this, we need to re­alise that “Cae­sar’s wife must be above sus­pi­cion”.

Peo­ple in high po­si­tions of author­ity should not even have any kind of sus­pi­cion or in­sin­u­a­tion made against them. Chanda could have up­dated the ICICI board against her ”con­flict of in­ter­est” and ex­cused her­self from the credit com­mit­tee that ap­proved the loan. A re­puted law firm gave a clean chit to Chanda but then went back on their stance when fresh rounds of al­le­ga­tion against her sur­faced.

Re­flec­tion

In this sea­son of cor­po­rate frauds, we have two big sto­ries — IL&FS and ICICI Bank. While they are qual­i­ta­tively dif­fer­ent, both point to lack of over­sight by the re­spec­tive boards of these com­pa­nies. As in­vestors, it is im­por­tant not to be swayed by the pub­lic re­la­tions ex­er­cises of charis­matic CEOs. Also, the pres­ence of well known fig­ures as in­de­pen­dent di­rec­tors in the boards of cor­po­rates does not mean much if they don’t per­form their re­spon­si­bil­i­ties.

With the un­prece­dented bonus claw back in­flicted on Chanda Kochhar, things will never be same again in cor­po­rate In­dia. “C” level ex­ec­u­tives and the boards would be way more care­ful now. That said, we, as in­vestors, can­not ex­pect the sys­tem to self cor­rect by de­fault. We can raise the is­sues in com­pany AGMs, con­fer­ence calls and a myr­iad other fo­rums.

The writer is an alum­nus of IIM Ban­ga­lore and co-founder, Money Wiz­ards. [email protected]

The pres­ence of well known fig­ures as in­de­pen­dent di­rec­tors in the boards of cor­po­rates does not mean much if they don’t per­form their re­spon­si­bil­i­ties.

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