The Chanda Kochhar case raises issues of corporate governance that go well beyond her

The Chanda Kochhar case raises issues of corporate governance that go well beyond her

corporate governance

News: The article discusses the CBI report on erstwhile ICICI bank CEO MS. Chanda Kochhar and standards of corporate governance in India.

Facts:

• Recently Central Bureau of Investigation filed an FIR against Ms. Chanda Kochhar, her husband Deepak Kochhar, head of the Videocon group Venugopal Dhoot and ICICI Bank executives for sanction of credit facilities in violation of rules, that caused a loss of ₹1,730 crore to the bank.
• The investigating agency has yet to establishe whether the loans were given in return for financial favours, a charge that is at the heart of booking them for criminal conspiracy, cheating and corruption.
• Kochhar committed the error of not disclosing to the bank’s board about her husband’s business connections with the Videocon group, which was a client of the bank.
• She continued to be a part of the committees that sanctioned credit facilities to Videocon when she ought to have distanced herself on basis of conflict of interest.
• The CBI inquiry report holds her guilty of violation of the bank’s “code of conduct, its framework for dealing with conflict of interest and fiduciary duties, and in terms of applicable Indian laws, rules and regulations.”
• Although ICICI bank’s board has accepted the report, also deciding to withdraw all bonuses paid to her since April 2009 etc. but the board gave her a clean chit as recently as March last year.
• It is hard to believe that the board was not aware of these developments, as a whistle-blower had made these allegations public in October 2016, but still the board gave a clean chit to her.

This case raises doubts over the standards of corporate governance at one of India’s largest banks. The ICICI Bank episode is only one among several instances of governance lapses in corporate India in recent times.  It highlights the need for regulators to maintain a strict vigil on the functions of corporate boards in an era of corporate mis-governance.