ICICI Bank scouts for new chairman: What should the incoming officer do to repair damage wrought by the Videocon loan row?

Private sector lender ICICI Bank has begun the hunt for a non-executive chairman as the term of the incumbent, MK Sharma, is coming to an end on 30 June. According to news reports, 70 year-old Sharma is not keen on a second term. As the process to scout for Sharma’s replacement has commenced , the lender’s Board has to take a call on whether an appointment has to be made from the existing pool of independent directors, or an invitation has to go out to an outsider, asking him/her to take up the position. Will it be a tall order to find a replacement for Sharma? For starters, there is no denying the fact that there is a large shadow looming over ICICI Bank ever since its MD and CEO Chanda Kochhar was put in the spotlight for the lender’s decision to sanction a Rs 3,250 crore loan to the Videocon group, allegedly on a quid pro quo basis that supposedly benefitted Kochhar’s family members – the Videocon Group pumped money into NuPower Renewables, a firm owned by Chanda’s husband Deepak Kochhar. However, finding a replacement for Sharma should not be an ‘insurmountable’ task, industry observers told Firstpost. No one should shy away from taking up the job, irrespective of the hit the lender has taken following the unsavoury episode entangling CEO Kochhar. “The new chairman has his/her work cut out. He/she has to ensure that the independent investigation being carried out is completed in its entirety, and must work to restore confidence among investors,” said Shriram Subramanian, founder and managing director, InGovern - an independent corporate governance research and advisory firm . If Sharma has to continue as chairman after the end of his tenure, at best it would be an interim step till the “controversies reach their logical conclusion and incumbents step forward to lead the Board,” said Manoj Kumar, founder of Hammurabi & Solomon, and a visiting fellow with the Observer Research Foundation (ORF). [caption id=“attachment_4497391” align=“alignleft” width=“300”]  ICICI Bank Chairman MK Sharma. Pic courtesy: ICICI Bank’s website.[/caption] In case the Board of India’s largest private sector lender is unable to find the right candidate for the position, then it should look among its own Board members for an interim replacement, observers said. The other independent directors on the Board are Uday Chitale, Dileep Choksi, Neelam Dhawan, Radhakrishnan Nair, VK Sharma (LIC Chairman), MD Mallya, and Lok Ranjan (the government nominee director). Bank’s many flip-flops ICICI Bank’s Board has taken a lot of flak for assuming a defensive position earlier, when it did not institute an independent enquiry to probe allegations against it and CEO Kochhar. The current chairman did put his might behind Kochhar, and the Board did back her  repeatedly . But the Board, last week , ordered an independent probe into allegations of ‘conflict of interest’ and ‘quid pro quo’ in Kochhar’s dealing with certain borrowers, the PTI reported. The scope of enquiry would be comprehensive and include all relevant matters arising out of and in course of examination of the facts and wherever warranted, use of forensics/email reviews and recordal of statements of relevant personal, the bank said in a statement. The decision to probe the Videocon loan controversy followed market regulator Sebi’s notice to Kochhar and the lender over dealings with the Videocon Group and NuPower. As such, “any new chairman’s primary push will have to be to work on credibility, responsive aspects and build investors’ confidence in the Board and the bank,” Kumar added. The new chairman must ensure that not only is the enquiry completed but that its findings are made public, said Meera Sanyal, former CEO & chairman of the Royal Bank of Scotland in India. The enquiry, the bank had said, will be conducted by an ‘independent and credible’ person. “The new chairman should ensure it is,” Sanyal added. Veteran banker Mallya One individual reportedly  being considered for the chairman’s post is Mallya, also the former Bank of Baroda (BoB) chairman and managing director. But an analyst shot down that suggestion. “He should not be considered at all,” she said, on condition of anonymity, because Mallya’s name has cropped up in the alleged Rs 2,919 crore loan fraud by Rotomac. “Mallya is not the right person to take on the job simply because he has been a banker in the midst of an NPA crisis and also because of the Rotomac allegation. Mallya would not be the right person for the job,” the analyst added. What’s next for ICICI Bank? Firstly, the new chairman will have to work on restoring the confidence of depositors and investors. The Board has to be blamed for what has happened as CEO Kochhar is the accused, said several analysts. In this case, it appears that the lender’s CEO, and not the Board, is more powerful. But the onus lies with the Board. The new chairman has to ensure transparency and accountability, they added. The ICICI Bank crisis shows that there was no accountability and no one knows who is responsible and is answerable to, opined Sanyal. “There is an urgent need for clarity of accountability. Is the Ministry of Finance (MoF) accountable or is the Reserve Bank of India (RBI)? There is no clarity as of now.” Another issue that has irked many is that while the CEOs and general managers of public sector banks have been hauled over the coals for their apparent role in alleged frauds, a leading private sector lender’s boss is being protected. Are the rules governing banks and bank boards different for private and state-owned banks when both are being accused of fraud? Last but not the least, credit committees should be made accountable, said the analysts. The new chairman’s to-do list will include, among other things, restoring brand ICICI to the position it occupied prior to the Videocon loan row; fight fire on all quarters like loan disbursals and the bad loans mess; and repair the tarnished image of the CEO’s office. The new chairman has to hit the floor running if and when he/she steps into current chairman Sharma’s shoes.