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Alas, Kochhar is NOT kosher

February 11, 2019 08:46 IST

'I am not surprised that hubris brought Chanda Kochhar down.'
'It would appear that as a person she thought she could do no wrong and as a leader she considered herself above what her company demanded of others in terms of financial probity and honesty,' says S Muraleedharan, former managing director, BNP Paribas.
Illustration: Dominic Xavier/

Things cannot be any worse for Chanda Kochhar.

First, the enquiry by Justice B N Srikrishna found her guilty of violating her bank's code of conduct.

The Central Bureau of Investigation jumped into the fray and commenced an investigation.

Now murky details of the Kochhars's property deals have come into the public domain.

Adding insult to injury, as it were, the ICICI board has retrospectively dismissed Chanda Kochhar and what must really hurt, clawed back all her stock options in what is surely the modern corporate equivalent of the medieval Judas Cradle.

These developments have evoked schadenfreude and horror in equal measure. The former is felt by those who are and have been professional sceptics of human nature and who believe that given time all human beings will sin.

These are the people who attribute all material success, such as the climb up corporate, social, or political ladders, and/or amassing of wealth can only be achieved through friends in high places, favours from those in power and plain old chicanery. Now, they claim, they have been vindicated.


Horror is felt by those who know they could well be the next. They know what they have done -- obviously we don't, yet -- and they might still be exposed given this atmosphere of distrust and blood-letting as an act of avenging corporate sins.

The FM must have deemed the atmosphere so corrosive and vengeful that he warned from his sick bed abroad, no less, against indiscriminate corporate lynching.

It is interesting how, when corporate malfeasance is sought to be exposed and punished, all and sundry deem it a blow against the entrepreneurial spirit, poisoning the business climate, and warn darkly that investment will flee if we hunt down the wrong-doers.

This is typically how the elite protect themselves, but that discussion is for another day. Now back to the hapless Ms Kochhar.

After the initial flurry of breathless media hyperventilation regarding the good lady's alleged misdeeds, Ms Kochhar did a Trump and hunkered down, waiting for it to pass which it inevitably would, when the media found another villain.

That is what Lloyd Blankfein of Goldman Sachs did when he was vilified and excoriated for his bank's role in the financial crisis of 2008.

That is what Trump does on a daily basis, with the exception that he comes out swinging and invents his own facts instead of quietly keeping his head down.

Sure enough, Mallya with his flamboyant lifestyle and barely-clad model friends did take the pressure somewhat.

Ms Kochhar kept a low profile, avoided responding to the allegations and was generally self-effacing for an A-lister. After the board had initially (and hastily) cleared her of any wrong-doing, the public outcry forced it to conduct a second and more thorough investigation, which they did in the time honoured tradition, by outsourcing it to a retired justice who can be relied upon to take a long time to say precisely nothing in thousands of pages.

Justice Srikrishna headed that investigation and has now submitted his report.

When it became clear that the tsunami of adverse public opinion was not going to go away and that she had become untenable as CEO, Ms Kochhar quit. One could not escape the conclusion that she must have known a week after the scandal surfaced that her days as CEO were over. But she continued for reasons known only to herself.

Some have suggested, somewhat unkindly, that she was trying to protect her stock options. Perhaps she was; perhaps not. We will never know.

I see that as a character flaw in her. She was unable to judge, even in the light of NiMo, Mallya, et al (there were many others), that the public mood was unforgiving towards the elite, even for the minutest of infractions, unless, of course, one was a politician in which case one thrived on the adverse stuff.

One of her former colleagues and CEO of another bank quietly went away when the RBI refused her an extension, and continues to keep a low profile -- now that is good judgement.

Sometimes our own celebrity status makes us believe we can walk on water. Alas, the laws of physics, for the most part, do not support such a belief (not everyone is Lloyd Blankfein and even he had to grow a beard to hide behind).

The information now in the public domain supports my conviction as to her impaired sense of judgement. She perhaps believed that she was too clever to be found out, that she was too high up to be crucified, or that this would fade away from the public's extremely fickle memory and normal business would resume thereafter.

She turned out to be wrong on all counts.

The convoluted deals have been unravelled and connected to her, and some form of nexus established between loans and investments in husband's firms (although a clear motive is yet to be proven for her actions).

It is now clear she too has feet of clay like the rest of us and that it is extremely risky to bet on the shortness of public anger and memory; or to defy the laws of physics.

Faced with the investigator's adverse report and the public's intolerance towards elites' wrong-doings, the board decided to act 'decisively' and 'firmly' and even punitively to sack her (how do you sack one who has already resigned?).

The decision to 'sack retrospectively' appears to be a device to facilitate clawing back the stock options already granted.

The board was protecting its own skin too, by acting quickly and in a 'draconian' manner -- the injured party can always go to court to get relief, but the board will be deemed to have acted appropriately unlike the previous one that exonerated her with undue haste.

Apart from sending a message that financial misdemeanour will have consequences, there appears to be an element calculated to humiliate the former CEO. Is this a warning to others? Intended or not, I think so.

What exactly were Ms Kochhar's misdemeanours? I do not have access to Justice Srikrishna's full report as it is internal to ICICI. However, the board quotes from the investigation in handing out their retrospective punishment to Ms Kochhar. The report finds three areas where Ms Kochhar went rogue:

1. 'Ineffectively dealing with conflicts of interest'. Translation: She did not disclose her husband's business connections with the Dhoots while sanctioning further loans to the Dhoots

2. Failure to recuse herself from the credit committee while it considered further loans to the Dhoots.

3. 'Lack of diligence' with respect to annual disclosures as per the bank's policies.

Let me take up No 3 first. Wow. I am truly gobsmacked by this one as it had not come out until now -- what did the previous board consider while giving her a clean chit? Was its meeting just an expression of backslapping bonhomie -- 'She's a jolly good egg, old chaps, and let's issue a press note to that effect'.

The so-called lack of diligence says a few things about who she was as a person and as a leader.

'Lack of diligence' is a polite way of saying that she did not care to report consistently and accurately her financial dealings as required by her bank's rules as well as laws and regulations of the land.

Normally banks require key employees to disclose all their dealings in the stock market, acquisition/disposal of immovable assets etc etc, and any dealing with any of the bank's clients. Some even take an irrevocable access to the bank accounts of key employees.

It is safe to read between the lines and conclude that she did not apprise the bank of her direct/indirect dealings with the Dhoots. As a result, the investigator concludes, 'The bank's processes were rendered ineffective by her approach to such disclosures and avoidance of conflict'.

Her lack of diligence in setting a good example with meticulous and stringent compliance with internal codes of conduct and external rules and regulations seems to be not an act of forgetfulness, but rather a habit. In other words, she did not forget, but did not want others to know!

What was it that she did not want others to know? We now have the answer: It appears that her home was purchased through a circuitous route involving the by now tiresomely familiar name, Dhoot. In the light of this, even the bumbling incompetent ignoramuses in the CBI should have a walk in the park with this case.

Points 1 and 2 above appear to indicate that she considered herself above the codes of conduct and rules and regulations and that these were meant for lesser mortals. The investigators's findings in 3 above would appear to confirm this.

I am not surprised that hubris brought her down.

It would appear that as a person she thought she could do no wrong and as a leader she considered herself above what her company demanded of others in terms of financial probity and honesty.

That, my friends, is NOT a good way for a leader to feel.

What of that guardian of public probity and honesty and slayer of corruption, the much feared but equally reviled CBI?

It has been said that the CBI can manage to overlook a whole pumpkin in a small plate of rice. Given that this case does not have a political angle -- the loony left and the dynasts are yet to weigh in -- it should be within the CBI's ability to close out easily.

They have thrown everything and the kitchen sink in their FIR. They have accused the entire board -- the first one, they of the backslapping bonhomie and midnight exculpatory press note.

Alas, some familiar and hitherto respectable names figure there, some genuinely nice ones too. But as a group they patently failed to take care of the interests of the stakeholders.

Is that a crime? I don't think so, but I'm no lawyer.

Will it get them barred from holding other directorships? I don't know, but think it should.

In a land where boards are filled with pet poodles who wait at the feet of the Lalajis and fetch at his call, all for a few bones, those who have that privilege must be made accountable.

So what happens now to Ms Kochhar?

The wheels of law will grind, but slowly. She appears to have got hold of some capable lawyers. Will she get her billions back? Possibly. Can she get her reputation back? Not very likely.

What will she do then? She can always join politics.

What lessons can we learn from this sordid story? That the mere existence of codes of conduct and rules and regulations do not ensure compliance with their letter and spirit.

The leader must go beyond law and be just and fair and hold herself/himself to a far higher standard than what the law prescribes or rules and regulations demand.

S Muraleedharan retired as managing director, BNP Paribas, after serving the bank for 20 years.

S Muraleedharan