The Downing Of Chanda Kochhar: What Boards And CEOs Need To Learn In A Hyper Media World

It is a pity that one of India’s brightest chief executive officers (CEOs) has to leave office in a blaze of negative publicity over an alleged conflict of interest, where her bank had given a huge loan to the Videocon Group when her spouse was doing business with people connected to that group.

On 18 June, when the ICICI Bank board, under pressure from the Life Insurance Corporation (LIC) and independent directors, asked managing director and CEO Chanda Kochhar to remain on leave till Justice B N Srikrishna completed his probe into this alleged conflict of interest, it was essentially pulling down the shutters on her tenure, which formally was to end nine months hence, in March 2019. In fact, she would easily have been given an extension until 2021, but that won’t happen now. No matter what Justice Srikrishna finds, Kochhar’s tenure at ICICI Bank is effectively over. The appointment of Sandeep Bakhshi as chief operating officer (COO) with powers almost equal to the CEO means that the situation is more or less irreversible. The only situation in which Kochhar can stay on will be if Justice Srikrishna finds that no conflicts of interest were involved at all – but that seems unlikely.

The conflict of interest essentially relates to a loan of Rs 3,250 crore given by the bank in 2012 to the Videocon Group just when parties linked to Videocon were about to invest Rs 64 crore in Kochhar’s spouse, Deepak Kochhar’s solar power business, NuPower Renewables.

While it would make sense for Kochhar to fight on and hope that Justice Srikrishna will offer her some kind of indirect exoneration, the problem is that such taints seldom vanish. No matter what the finding, Kochhar will not be able to rediscover her former halo as the media has extensively commented on her in this episode. In a world with excessive media scrutiny, often ill-informed, she will always be regarded as the CEO whose tenure came under a cloud on allegations of conflict of interest.

This should be obvious from the fact that the ICICI Bank board itself has had to eat crow. On 28 March, the board was steadfastly pro-Kochhar, dismissing claims of conflicts of interest. It said it had “full confidence and reposes full faith in the bank’s MD & CEO Chanda Kochhar…On looking at all the…facts, the board has come to the conclusion that there is no question of any quid pro quo/nepotism/conflict of interest as is being alleged in various rumours.”

Three weeks later, the company reiterated its stand and rubbished a reporter’s suggestion that the board had authorised an external inquiry into Kochhar’s case. It said: “your information that ICICI Bank’s board is contemplating an external review is entirely speculative and baseless in nature.”

Now that it is swallowing its words by appointing Justice Srikrishna to do precisely that, it is difficult to assume that even with an exoneration, Kochhar will be back at her old job. A board which cannot ultimately stand by what it said even two months ago is unlikely to be able to allow her to stay on.

When the media gets a whiff of alleged wrongdoing, the situation often generates its own momentum and forces changes in even well-articulated board positions.

This happened with the Infosys board, too, which last year backed CEO Vishal Sikka’s business strategy after founder Narayana Murthy raised objections to his pay package, his role in the purchase of Panaya, and the severance package given to former chief financial officer Rajiv Bansal. It was presumed by media that Bansal was paid a huge golden handshake to keep mum on the Panaya deal. Panaya is now on the block.

A year on, neither Sikka nor the old Infosys board remain.

The lesson for company boards and CEOs to learn is simple: in a hyper-media world, one misstep can ruin you. So, make sure that nothing even remotely risky is attempted.

The problem is this: risks are inherent to businesses, especially in an India where boards are hardly insulated from political or bureaucratic pressures, not to speak of businessmen seeking to influence banks in their own interests.

But one more point is worth making: the media’s sudden obsession with conflicts of interest is hypocritical, when it is in bed with those same corporate interests for advertising support and financial viability.

A more controversial point to underline is this: Kochhar may have stumbled, but this does not make her a bad CEO. She was probably more unlucky than bad.