Propriety, and the high standards of corporate governance that the bank swears by, demand that she step down right now
Nemesis for many celebrities comes through their offspring. A prodigal son or daughter can often, through their actions, demolish the carefully earned reputation of a lifetime. Sometimes that happens through a spouse. As in the case of Chanda Kochhar, Managing Director and CEO, ICICI Bank, who is in the eye of a storm, over a conflict of interest issue.
Her husband Deepak Kochhar and some family members had a joint venture with Venugopal Dhoot of the Videocon group. The allegation against her is that ICICI Bank provided loans to the Videocon group (later declared NPA) even as there seemed to be a ‘sweetheart’ deal by which the Videocon group through its various arms invested in the joint venture of her husband.
For the past decade that she has been at the helm of ICICI Bank and even in the decade preceding it, she hardly ever put a foot wrong. She was the banking sector’s first telegenic star and as a woman making it to the top, was always seen as a role model for those striving to climb the corporate ladder.
She often topped various surveys of the most powerful women in business or among the most admired bankers in the country. Shoot any question at her — whether on the credit crisis, interest rates, NPA issues, policy paralysis, slowdown or pick-up — and she would always produce the perfect quote.
There would be no hemming and hawing. It would always be precise, neutral and politically correct. It could be frustrating for those trying to read too much meaning into those statements, but you couldn’t quarrel with them. As a strategy to be on the right side of the powers that be and not let her views affect the organisation in any way, it was flawless.
A question of propriety?
Now, for the first time, she has her back to the wall. And her silence is as surprising as it is eloquent. Yes, the board of directors has come to her support. Their defence is on these lines — there was no conflict of interest as Videocon was not an investor in NuPower, the joint venture; that the credit committee had many independent directors; that the loan was part of a consortium; and that she made disclosures as required under various laws.
The arguments are cleverly worded but this is an issue that was never only about legality. It was about ethics. Propriety demanded that she should have disclosed to the board her ‘interest’ in the Videocon loan on the grounds that her husband had a business dealing with the group.
Second, the highest standards of corporate governance demand that she should have recused herself from the discussion at the board and voting on the deal.
To merely say that the board committee sanctioning the loan was chaired by someone else or that the committee had many independent directors doesn’t let her off the hook. A proposal worth ₹3,250 crore doesn’t get passed at the board level in any bank without it being backed or pushed by top officials.
There is no easy way of saying it — but the way out of this whole mess is for her to resign. Perhaps the Board may have to suggest it to her informally and provide her an honourable exit. Place on record her considerable contributions towards building the organisation. But accept her resignation — with of course the deepest regret. The current climate of public resentment as well as intolerance for grey zones with regard to bad loans may demand nothing less.
The damage to her as well as the bank’s reputation is colossal. Her moral standing and ability to demand total integrity from her staff and her effectiveness as a leader stands weakened. And the damage goes beyond just affecting the morale of the bank staff. What about those who looked up to her as a role model and aspired to reach the top? Think of the setback to those who have been arguing for privatisation of public sector banks on the grounds that they are cesspools of corruption and inefficiency.
If this can happen in India’s top private sector bank, then how can we accuse public sector banks of crony capitalism? It might be entirely presumptuous to say it, but her seat at the high tables of various government and industry forums, as a trusted and valued voice of advice to finance ministers and RBI Governors, will now be shaky.
Chanda Kochhar was given the The Woodrow Wilson Award for Corporate Citizenship last year — an award that is given to executives who demonstrate a commitment to the common good that goes beyond the bottom line. Perhaps she will have to demonstrate that commitment to common good once more by leaving the scene. It is time for a new leadership to take over at the ICICI Bank.