The preponderant view so far on this is, that the action is inadequately supported by reasons and has dented the market sentiments of not only the HDFC stock, but overall.
It is actually more of the latter. If, for some reason, the stock did not react so adversely, this would have passed more lightly in the media, which is obsessed with the stock market.
There are many aspects that merit due consideration about this development, outside of the speculations flooding the media.
It is not for this column to evaluate if these are good enough for someone to step down, abruptly.
The salient factor to emphasise is, that a decision to step down from the highest post in the biggest private sector bank in the country would not be taken flippantly by any person.
Even if all the material on this matter is fully made public, which is more a fantasy, evaluating them as to whether they are good enough to resign may be beyond the remit of anyone, as this is a personal decision.
However, knowing fully all the material reasons is important to assess if they are serious enough to affect the goodwill and the image of the institution or a mere clash of personality or ego.
What needs to be weighted in this episode is the conviction that helped decide, when the consequences of this and the criticisms it would attract would never have been lost upon.
While not a comparable situation, N.A. Palkhivala, has mentioned in the book, ‘We the Nation’, that he initially accepted the appointment as the Attorney General for India, but that very night he woke up from the sleep with the conviction he should not take it up. He informed the minister the next morning and apologized that he was backing out of the commitment.
There are persons who act out of deep conviction, irrespective of the situation and the cost of such a decision. In fact, these decisions count for more, when the associated cost is high, than at a time when it matters less and done more for publicity!
A small but a relevant digression to illustrate another case.
On 18th August 2017, Infosys Ltd released a press statement that, N. R. Narayana Murty, a founder of the company, was, in various ways, undermining the independent functioning of the board of the company. The detailed statement is a good read for those who have forgotten this issue.
This was an unprecedented step by a major company. But this alone helped to bring to light the questionable conduct of a major protagonist for governance.
Both sides washed the dirty linen in public. R. Seshasayee, the chairman and a few others quit the board. If the chairman had quit on the sly, no one would have known the darker side of the happenings in this case.
In Infosys, the exit of the chairman ended the controversy. By contrast, Atanu Chakraborty’ resignation has opened a new chapter in HDFC Bank that none suspected to exist!
A major criticism is that Atanu Chakraborty did not specify the details but stated in vague terms that ‘Certain happenings and practices within the bank, that I have observed over last two years, are not in congruence with my personal Values and Ethics. This is the basis of my aforementioned decision.’
The critics have gone after him for opening a Pandora’s box but not letting everyone know its contents! There is validity to the criticism that he should have been more explicit and mentioned the steps he took to resolve them and why they failed.
The bank has categorically denied any ethics or governance issues. They have a choreographed response that everyone is baffled by the decision and that the effort to elicit the specific issues, failed.
They have, at best, admitted to normal differences that exist in all large organisations amongst the senior levels.
The bank’ response is unconvincing. Such a senior person with years of holding high positions, would not take an irresponsible decision, especially the one that can raise question on his motives. There is more to this than what the bank would wish the public to believe.
The onus is on the bank to come out with a honest disclosure of its version of the differences that existed; just as Infosys board put out its version of the controversy. That would place the burden on Atanu Chakraborty to concur or give his version.
HDFC Bank has appointed external law firms to conduct review of Chakraborty’s resignation letter.
Yet, Chakraborty has to explain why he accepted the reappointment for a three year period in May,2024, which fell within the two year period mentioned in his letter. If problems had already surfaced then, why did he opt for the additional term without a clear understanding on how those would be addressed?
Further, even his most recent letter to the shareholders did not bring out any possible areas the bank needed to do better on governance On the contrary, they had very complimentary references.
A sample is extracted to illustrate the point-
‘In FY 2024-25, the Bank reported healthy growth while maintaining pristine asset quality. There is immense opportunity for offering banking services in India as the economy grows. HDFC Bank is well positioned to capitalise on this due to its strong balance sheet as well as established brand name. While pursuing growth, the Bank will not compromise on high corporate governance standards and will continue focusing on its five core values: Customer Focus, Operational Excellence, Product Leadership, People and Sustainability.’
This subject will be actively debated till a more engaging one breaks out- that may not be far away; the corporate sector seldom disappoints on this score!
These board room drama of the chairman hanging on without due moral ownership, or resign like Seshasayee or Chakraborty does resonate in our epics!
Vibhishana fled Lanka when his advice was spurned by Ravana. He acted by his conscience and gave up when they were at loggerheads with the benefits of status quo. Even in his case one can say he acted late, but did, nevertheless!
On the other hand, Bhishma, whose advice the Kauravas never heeded, stayed on in their midst, may be with much discomfort.
While no two situations may be identical, the question that stares a board member is which role model to adopt; or to find a third path!