Opinion | Why Chanda Kochhar’s indictment is not enough

The role of the ICICI Board, which can’t feign ignorance on the operating details, must also be critically reviewed.

The Russian novelist, Fyodor Dostoyevsky, once said: “Above all, don’t lie to yourself. The man who lies to himself and listens to his own lie comes to a point that he cannot distinguish the truth within him, or around him, and so loses all respect for himself and for others.”

The inquiry committee under former Supreme Court Judge BN Srikrishna, appointed by the internal audit committee of ICICI Bank, has found Chanda Kochar was in violation of the bank’s code of conduct and that she acted in “conflict of interest”. (REUTERS)

This pretty well sums up the position of the ICICI board since 2016 when the whistleblower’s report was made public till Justice BN Srikrishna was appointed. In this din, if the ambient noise is cut out, all that remains is the fact that former MD and chief executive officer of ICICI Bank, Chanda Kochhar, was protected by a benevolent board. What this would have done to the culture within ICICI Bank should be a matter of gravest concern to all its stakeholders.

I wrote in May 2018 that what I found amazing was 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. In any case, the issue of Rajiv Kochhar, the ubiquitous brother-in-law of Chanda Kochhar, who breezed in and out of the bank “advising” on many large ticket loan restructuring deals involving ICICI, was known to all. Wasn’t this enough to apply the brakes? The logic that this was not illegal and that 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 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, given the board’s benevolent silence whilst such deals, involving the top executive’s immediate family, were the norm. Do remember that the board cannot feign ignorance on “operating details” because as many as four members are executive directors of ICICI Bank.

Perhaps this is what the CBI based its conclusions on while casting the net wide to include both past and present directors and senior management of the bank.

The ICICI board had an excellent opportunity to set things right and it is disappointing to see its intent in not pursuing the matter any further. Whilst the investigative agencies will focus on the strict legality of the issues raised, the board should have focused on the principles of ethical governance and what constitutes ethical leadership, its place in contemporary governance of 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 that involve public money and are based purely on trust.

The tone for corporate culture is set from the top, and a display of its determination in this regard is critical to 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.

Firmly dealing with cases in which other officials on various committees allowed a predetermined outcome by following the line of the CEO is part of this cleansing. Cowardice of the management team or “celebrities” is a reflection of the meekness of the society we live in. Leaders honed in this culture will find it difficult to drive this transformation the bank so desperately needs. Success is usually a reward for being a conformist and successful people, for all their qualities, are covertly or overtly subservient to these norms.

Such a society will hardly be a meritocracy or be able to break the nexus between the corrupt and the powerful.

Sometimes we are forced into directions we ought to have found ourselves. What defines us, though, is how we rise after falling. The board may well have lost this opportunity.

Prabal Basu Roy is a Sloan Fellow from the London Business School, PE Investor and Corporate Advisor and formerly a director and Group CFO in various companies.

The views expressed are personal