Dozing Doorkeepers?

With recent frauds shaking investors’ trust in corporate governance standards, we look at role, limitations and accountability of independent directors who are custodians of these standards.

- Dipak Mondal

After the conflict of interest case involving ICICI Bank CEO Chanda Kochhar came to light, the bank, on March 28, issued a statement defending its credit approval processes and the role of its CEO. “The credit approval authorisation framework is laid down by the Board of Directors. The larger exposures are approved by the Credit Committee of the Board. The majority of Credit Committee members are independent directors of the bank. The Chairman of the Credit Committee, till as late as June 2015, was always a non-Executive Director,” it said  of its non-executive directors to convince shareholders, media and others interested in the developments that “there are adequate checks and balances in loan appraisal, rating and approval processes within the bank, both from control as well as from governance perspective.” The issue at hand was a ₹3,250 crore loan to Videocon Group, which had business relations with Chanda Kochhar’s husband Deepak Kochhar.

The statement went on to say that the board did not find any evidence of nepotism or conflict of interest in extending the loan. However, under pressure from various quarters, including CBI and Sebi probes, the bank board finally asked Kochhar to go on indefinite leave till the probe ordered by it is completed. At this stage, questions began to be asked about the role of the bank’s board, especially the independent directors. Many experts say the ICICI Bank fiasco again proved that independent directors, supposed to be custodians of corporate governance, are happier toeing the management line than raise questions on issues concerning governance and minority shareholders.