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Chanda Kochhar Should Have Resigned By Now, Twice.

Founder and CEO, Transfin.
Apr 9, 2018 9:51 AM 2 min read

The conflict of interest charge on ICICI and the Kochhar clan has only added another layer to the crisis afflicting the banking sector in India. The allegation, stripped of all embellishment, is simple. Did ICICI Bank go wrong in lending to a counterparty when its CEO’s spouse had an ongoing business relationship with the same? Can the same CEO’s extended family (i.e. brother-in-law) advise ICICI’s debtors?


It is not a matter of legality which I’m sure any killer attorney would argue against. It is a matter of propriety which comes with a high office. And being CEO of one of India’s largest private sector (also listed) banks is a sufficiently high office. As the top management officer appointed by the Board and by extension the shareholders, the onus is on you.


Financial institutions are familiar with the concept of “conflict checks”. Any global investment bank would conduct them to ensure they (or their subsidiary/branch) are not advising on the opposite of a transaction, or do not hold a significant trading exposure, before accepting a mandate to advice a client on say a M&A situation. Such mechanisms should naturally apply to senior management, especially for an organisation like ICICI – not promoter owned/controlled but widely held by institutional investors including big mutual funds and foreign bodies. What disclosures are the likes of Mrs Kochhar supposed to mandatorily make regarding her family and extended family’s business interests? At what frequency? How is that being recorded and monitored? How is this information actioned upon within the company’s compliance function? Should the Board wait for investigations to conclude before taking any concrete actions?


Corporate officers should be held to the same standards of scrutiny and probing usually reserved for public servants/politicians. Just as the latter is held responsible for tax payer’s money, the former is answerable to stakeholders. They naturally carry the burden of reputational risk for the organisation they represent and shareholder value will continue to erode till uncertainty looms, either around their own actions or their future with the company. That is why the Board expressing support (even informally) for the CEO when multiple agencies are kicking off investigations is premature and irresponsible. That is why Chanda Kochhar should have resigned or been asked to step down by now.


Deepak Kochhar (Chanda Kochhar's husband) in an interview with India Today argues,


“Where is the conflict of interest? ICICI Bank will have relationship with all top corporates in India. If I can’t touch any corporate who deals with ICICI, is it fair to me? Can I function like this? I am a Bajaj MBA and a Harvard alumnus. I am an educated professional. Should I sit at home just because my wife is CEO of ICICI Bank?”


When your wife is the CEO of one of India’s Systemically Important Banks which can tap global capital markets as it pleases, you should touch very carefully.


Full disclosure: I have a savings and current account with ICICI Bank which I do not intend to shut down in light of recent events. They don’t ask me to come to their branch each time I change my address, which in itself is priceless.