Justice BN Srikrishna panel findings on former managing director and chief executive officer (CEO) Chanda Kochhar’s role in the ICICI-Videocon loan quid pro quo deal case sends an important message to Indian corporate boardrooms, which leave the so-called golden standards of corporate governance only on laminated paper sheets in corner offices. Also, to those who choose to protect their erring CEOs without looking at the merits of allegations in the hope that public memory is short.
The ICICI-Videocon scandal is a big case study for management students in the above context. Soon after the allegations against Kochhar linking her husband and Videocon Group chief Venugopal Dhoot came to public attention, the bank’s board committed its first major mistake of giving a clean chit to Kochhar in an unwarranted hurry.
The board comprising of a set of experienced and erudite financial sector professionals chose the best words while exonerating Kochhar. “There is no question of any quid pro quo/ nepotism/ conflict of interest as is being alleged in various rumours.
"The board has full confidence and reposes full faith in the Bank's MD and CEO Ms. Chanda Kochhar,” it said, even calling the allegations first raised by whistleblower Arvind Gupta in a 2016 letter to PMO, “malicious and unfounded rumours".
On Wednesday, after the panel probe outcome was made public, the bank said it will treat Kochhar's resignation as 'Termination for Cause' and will stop payment of unpaid benefits including unpaid bonus or increments, unvested and vested and unexercised stock options, and medical benefits.’
This is nothing but a clear confession.
The board would be now repenting their initial hurry to protect the former CEO.
Chanda Kochhar’s role in controversy clear
The Srikrishna panel leaves no room for ambiguity in Kochhar’s role in the Videocon-NuPower-ICICI chain of transactions. Kochhar’s charge? She didn’t make proper disclosure to the board about her family links with the corporate borrower.
The panel said Kochhar was "in violation of the ICICI Bank Code of Conduct, its framework for dealing with conflict of interest and fiduciary duties, and in terms of applicable Indian laws, rules and regulations."
Also, the Central Bureau of Investigation's (CBI) FIR dated 22 January, 2019 is a good read for the ICICI Bank board. It details step by step how the rules of the game were allegedly rigged by the Kochhars to favour Dhoot.
The agency’s preliminary inquiry revealed that Kochhar abused her position as the CEO of ICICI Bank to sanction multiple loans to the Videocon Group companies, including a loan of Rs 300 crore to Videocon International Electronics Ltd (VIEL) on 26 August, 2009. On 7 September, 2007, the loan was disbursed to VIEL.
The very next day, Dhoot transferred Rs 64 crore to NuPower. This was the first investment Deepak’s firm received to acquire its first power plant. Thus, the CBI uncovered evidence of the Kochhars getting illegal gratification from Dhoot.
Kochhar’s fall from grace after long years of service in building the bank is a lesson to aspiring CEOs.
Kochhar had joined ICICI back in 1984 as a management trainee when the bank was still a non-banking financial company (NBFC) called the Industrial Credit and Investment Corporation of India which later became the ICICI Bank.
Over the years Kochhar’s growth in ICICI Bank was steady and a model for any aspiring banker; she rose through the ranks and played an instrumental role in building the entity to one of the biggest banks in the country, particularly its retail portfolio. But, after nearly three and half decades in ICICI, Kochhar exited with her professional image tainted.
What about ICICI Bank Board’s role?
That isn’t the end of the story. The ICICI Board’s initial approach to the case (it agreed for an independent probe only after a nudge from regulators and media glare) raises serious questions on the role of the board in the whole affair.
The banking sector is generally considered as a proxy to the economy and ICICI is one of the too-big-to-fail banks. Its conduct on corporate governance will not go unnoticed by both global and domestic investors.
There needs to be a detailed probe on what exactly was the role of the Bank's board members in this whole story. How did the board let serious lapses on rules and regulations take place at the largest private bank in the country and the reasons it adopted a soft approach to its former CEO, who clearly acted in a suspicious manner and allegedly benefited from the deal.
The argument that no one knew anything about the Kochhar family's business links with Videocon wouldn’t have many takers.
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Updated Date: Jan 31, 2019 15:17:40 IST