Had the ICICI Bank board asked MD and CEO Chanda Kochhar to go on leave, or had Kochhar volunteered to do so, and welcomed a probe when the first set of serious allegations surfaced, both the board and Kochhar would have scored high on the corporate governance index. Also, it would have sent an important message to shareholders and investors that at least some in the board think the ship is bigger than its captain. But none of that happened. The ICICI board patiently waited for more than two months for Kochhar to willingly go on leave pending a probe.
There are questions now on the board's approach, on why it delayed a probe on the Kochhar issue and how high it held good corporate governance standards. The bank's image has taken a beating. The board's blind love for its CEO has cost the institution dearly.
Undoubtedly, there were strong reasons for Kochhar to stay away from office from day 1. After all, the charges against her and her family members pertained to the misuse of the CEO’s office. Whether there is truth in it or not; the board and Kochhar should have treaded cautiously for the bank's first commitment is to its depositors and shareholders, not to one of its employees.
The allegations pointed fingers at big names such as the Videocon group, the Essar Group, Chanda's husband Deepak Kochhar and her brother-in-law Rajiv Kochhar. Anyone could have alleged that her continuance at the powerful office could influence any internal probe in some way.
The latest act, of Kochhar going on leave on her own and the institution of a probe by a reputed person, is welcome but has come too late; the image of the bank, with respect to safeguarding the corporate governance standards it represented at one point has already suffered damage.
Nevertheless, the board was left with no choice but to justify its decision to back Kochhar since the early days of the Videocon loan controversy. Taking a U-turn on Kochhar after defending her wholeheartedly would have raised further questions on the board’s initial response.
In hindsight, one can argue that the ICICI Bank board should not have jumped to defend its CEO. In a bid to back the image of the CEO, someone at the board seemingly forgot that a bank is the guardian of public money, and that public faith matters the most.
The board pushed for an independent probe after market regulator Sebi pulled up the bank, when it sought details in connection with the Rs 3,250 crore Videocon loan case.
In the meantime, a fresh round of allegations against the Kochhars surfaced and the pressure to act mounted. Shareholder Arvind Gupta raised allegations involving the Essar Group and ICICI Bank.
Earlier, Gupta wrote to authorities, in 2016, (including to the PMO) arguing that for wrongful personal gains both parties (the Kochhars and Venugopal Dhoot) acted in a non-transparent manner with respect to certain financial transactions.
Gupta alleged that Videocon group promoter Dhoot floated an equal joint venture - NuPower Renewables Pvt Ltd (NRPL) - with Deepak, invested Rs 64 crore in the JV and later transferred the entire stake to Kochhar. Gupta then linked those transactions to a 2012 loan worth Rs 3,250 crore from the ICICI Bank to the Videocon group, and termed it as a possible quid pro quo deal. Remember, ICICI Bank has said that the brother of a husband does not fall within the definition of a 'relative' under the Companies Act, 1956 or 2013 or the Rules thereunder. The lender added that hence there is no requirement of any disclosure of such a relationship by any official of the bank.
That was the response given to a Firstpost query in connection with allegations that an advisory firm run by Rajiv was given the mandate to restructure foreign currency-denominated debt deals, worth over $1.7 billion, of seven companies over six years.
Technically, the bank is right. But standards of good corporate governance are not always defined by words written in the rule books. The ICICI episode puts out a major lesson for corporations, on how not to handle any looming corporate governance crisis.
If the Justice Srikrishna internal probe clears Kochhar, newly appointed COO Sandeep Bakhshi will have to be content with the number two position in the bank, else the logical action would be to promote him to the CEO’s post. But, the board's approach on the Kochhar issue will be questioned again in times to come. At this stage, Kochhar going on 'voluntary' leave pending a probe appears to be nothing more than a face saving exercise by the ICICI Bank board.
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Updated Date: Jun 20, 2018 13:30 PM