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The Chanda Kochhar Controversy: How Will The Cookie Crumble?

The Board now has an excellent opportunity to set things right by ensuring a fully independent and fair enquiry whilst the investigation by the enforcement authorities are parallelly in progress

Photo Credit : Subhabrata Das


Though significantly delayed, the recent decision of the ICICI Board to institute a full-blown enquiry into the Chanda Kochhar controversy is welcome. It is intriguing, though, that what should have been the most obvious course of action was stonewalled for so long. So is this recent turn of events a genuine change of heart or just an effort to isolate the board and redeem its dwindling reputation as ongoing investigations perhaps point to the veracity of the allegations? Or was it a directive from the Government which had, by then, received the second set of allegations involving the Essar Group? Or is it simply the age-old Indian model of setting up enquiry commissions to divert attention, camouflage reality and provide honorable exits to the distinguished personages involved. Only time will tell! 

Those with an ear to the ground knew of the Essar “connexion” for many years now but did not have the wherewithal of Mr. Arvind Gupta to piece together painstakingly the information to make a definitive set of allegations. But what amazes me is that the Board and insiders in the bank were blissfully unaware of all that was swirling around. In well-managed companies, there are inbuilt mechanisms to limit such exposures quickly, and without the need for detailed investigations. In any case, the issue of  Rajiv Kochhar, the ubiquitous brother in law of Chanda Kochhar, being the financial adviser for many large ticket loan restructuring deals involving the bank was known to all publicly: wasn’t this enough to apply the brakes? The reasoning that this was not illegal, and brothers in law do not fall within the purview of “relatives” as defined in some statutes, is a weak and largely self-serving argument. All this raises the more serious question on the management culture of what has commonly been projected as India’s best run bank in terms of professionalism and governance. Is it conceivable that it was only Chanda Kochhar alone who yielded such enormous and concentrated power that all other officials involved in approving transactions were forced to look the other way? I don’t know the answer to this; but any rational investor and depositor will ponder if it is indeed too far-fetched to consider the feasibility of others too dipping into the pot given the Board’s benevolent silence whilst such deals, involving the top executive’s immediate family, were doing the rounds. Do remember that the Board cannot feign ignorance on “operating details” because as many as four members are executive directors of ICICI Bank.

The Board now has an excellent opportunity to set things right by ensuring a fully independent and fair enquiry whilst the investigation by the enforcement authorities are parallelly in progress. Whilst the latter will focus on the strict legality of the issues raised, the Board must focus on the principles of ethical governance and what constitutes ethical leadership ,its place in contemporary governance, disclosure norms in listed entities and above all the need for Caesar’s wife to be above suspicion in the battle of perceptions which any leader fights on a daily basis……. more so, leaders of businesses involving public money and which are based purely on trust. It must also focus on firmly dealing with cases where the involvement of other officials become evident. The tone for corporate culture is set from the top…and the Board must use this opportunity to display its determination in this regard. 

For this to happen in the public perception, the Board would need to appoint a credible face, issue an ironclad mandate and demonstrate visibly the will to go through with the investigation in the level of detail necessary to get to the bottom of the transactions. In India we are too familiar with the standard model of derailing investigations and, given its importance, this must be guarded against in this case.

In well-governed jurisdictions, Chanda Kochhar would have had to step down long ago. I am disappointed that she did not feel the necessity of even stepping aside to ensure a free and fair investigation as I had called for in these columns within a day of the infamous and misguided Board presser expressing full support for her in March. A recent international example in early April of Sir Martin Sorell, the iconic chairman of WPP and its face and driving force for 33 years, stepping down within a week of whistleblower allegations – unproven so far – is what governance is all about, especially those involving public figures. The Indian mentality of clinging on till proven guilty in a court of law after decades of legal wrangling is a model honed to perfection by the political class – it would be most unfortunate if this is now allowed to percolate to the private sector,  and that too in India’s storied financial institution with a majority foreign ownership.

Which way the cookie will crumble once all the various investigations are concluded will determine the message we wish to convey for the standards of governance we opt for within our country’s corporate sector. And how serious we really are in not only cleaning the system we have created for ourselves but demonstrating the will to set the tone for a resurgent future.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

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Magazine 9 June 2018 chanda kochhar

Prabal Basu Roy

The author is a Sloan fellow of the London Business School and a chartered accountant. He has previously been a director/ Group CFO in various companies. He now manages a PE fund and advises startups / corporates.

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