Mythology is replete with fallen gods who at various times, paid a price for some indiscretion or the other. The corporate sector is now in competition with the stories of the past and creating its own sordid serial of fallen idols! The ‘Chanda’ in focus is not the idyllic moon, but a mortal, the much celebrated of one from the most admired banks globally! The story is now too well known to permit a retell and the latest denouement of the celebrity being hauled before the law and taken to prison may mark one of the most appalling instances of a Padma Bhushan awardee being taken to the jail for an alleged fraud and misfeasance!
What brings such persons, who possess and enjoy everything that a human being can aspire for and dream of, to commit crimes that even the most compassionate of the Gods cannot pardon?
Becoming synonymous to the organisation
Financial and economic crimes that undermine the institutions and systems are more heinous than a bugler breaking into the bank and making away with all that is available. Chanda Kochar had a remuneration that was 133 times the median remuneration in the bank (FY 2016-17) and the next highest paid director drew 88 times the median remuneration. This was topped by a very liberal stock-based compensation that must have been many multiples of the salary.
Stability at the upper echelons is a virtue only up to a point. At some stage, the person and the office become synonymous. And worse, beyond that stage, the person gets bigger than the office! Too easily institutional successes get attributed to individuals and sets the stage for hubris and actions with no fear of being questioned.
Just three bosses in five decades
In elected offices, capping the time may be difficult. While corporate positions carry a pretense of an election, the process is so crusty that an incumbent with a cult like image can go on forever. ICICI Bank and its predecessor, the DFI, in the last about five decades had only three real bosses. N Vaghul was the Chairman for almost a quarter century, followed by K V Kamath, a couple of decades as CEO, and six years as Chairman, till 2016. Chanda Kochar was the second in command to Mr. Kamath for the time the latter was CEO, and then succeeded him as MD& CEO!
Governance had always been an issue
ICICI bank (and its predecessor institution) was always skating on the thin ice of governance. The bank’ evolution started when the DFI reverse merged into it to wipe out a pile of bad debts on the last day of the accounting year. No accounts were produced for the operations of 364 days and this set a new low in corporate transparency then! Its takeover of ITC Classic and Anagram Finance are stories that surprisingly were not made into movies. Yet not too late!
It is important to note how the bank dealt with this issue when it was brought up by a whistle blower, an activist investor in the bank. The bank’ board stonewalled the complaint and declared that no norms stood violated in extending the loans to the Videocon group.
Just in passing remarks…
The annual reports of the FY 2017 and 2018 had no whisper of the allegations, though the matter was widely reported in the media. The Chairman’s letter to the shareholders alone in 2018 had a passing reference to issues of corporate governance with no other specific concern expressed. It is the persistence of the whistle blower Arvind Gupta, and a coverage in the press, that compelled the bank to get a former judge of the supreme court to investigate the matter.
In the annual report of the year 2019 only, the independent auditor in the corporate governance report had given a note, and there was little else in the director’s report about the case. The bank failed to acknowledge the gravitas of the issue and at no stage made voluntary and proactive disclosure to the shareholders. The report of Justice B N Srikrishna was never shared with the shareholders. The case has many similarities to what happened in NSE and the conduct of the Board to coverup as much as possible is no different in both instances.
Banks must be held accountable
There is a crisis in the regulator, being in a state of paralysis most of the time. Banks must be differentiated for the level of corporate governance expected of them. They are the biggest provider of capital in the economy. The savings of the citizens are fully trusted to their care. They not only should exhibit the highest level of governance; but enforce it on the borrowers too. The nation cannot afford what the banking sector in the last five years has written off as debts; of more than Rs10 trillion! To add insult to injury, the beneficiaries of the write off are not the poor and the underserved sections of the society.
