Ignominious hat-trick

First it was Dr Ram Mohan Rao, the Dean, no less, of the Indian School of Business (ISB) at Hyderabad which boasts world-class curriculum, especially in eternal verities and business ethics. With a string of academic achievements and awards to his credit, he was an Independent Director on the Board of the Satyam Computers and Chairman of its Audit Committee for several years.

Right under his nose happened perhaps the largest corporate fraud in India's history amounting to Rs 7,500 crore. He had to resign from the post of the Dean of the ISB. When asked how such a high octane expert in business administration and the Dean of the ISB, to boot, could be so negligent, Dr Ajit Rangnekar, who succeeded Dr Rao as the Dean, was disdainfully dismissive. Quoth he: The misconduct of the faculty of the ISB outside the School is none of its, or anybody else's, business!

Next was Mr Anil Kumar, the Founder-Director, no less, of the ISB, and a former McKinsey & Co. director. He pleaded guilty on January 7, 2010, to the criminal charge of leaking inside information for over five years in return for $1.75 million from Raj Rajaratnam, co-founder of the Galleon Group LLC hedge fund, who himself, as per a media release from the US, “is at the centre of the largest US crackdown on hedge-fund insider trading in US history”. He has been slapped with a fine of $2.8 million and reportedly agreed to testify against Rajaratnam and others in a plea bargain to reduce a possible prison term of 25 years.

Premonition

My column (Two below par are two too many) of October 26, 2009 referred to both the cases and concluded with the observation: “Two black eyes within nine months are two too many and Dr Rangnekar's nonchalant excuse will only fuel speculation that what the people have seen is only the tip of the iceberg.”

My premonition has proved correct. The ISB has now been rocked a third time with the Chairman of its Board, Mr Rajat Gupta himself, again of luminous professional credentials, being hauled up by the US Securities and Exchange Commission (SEC) on several counts of malfeasance.

The SEC has charged Mr Gupta (whom it describes as a friend and business associate of Rajaratnam) with providing him, “knowingly and recklessly” with confidential information learned as a member of the Goldman and Procter and Gamble Boards, and helping him make $18 million in illicit profits and loss avoidance. The SEC makes many other grave allegations in its several pages long averment.

It even gives graphic hour-wise, minute-wise accounts of the calls Mr Gupta allegedly made to Mr Rajaratnam and their durations. The Director of the SEC's Division of Enforcement, Robert Khuzami, sums it all up thus: “Gupta was honoured with the highest trust of leading public companies, and he betrayed that trust by disclosing their most sensitive and valuable secrets.”

Had it been the Government, for a fraction of similar revelations, there would have been by now a nationwide furore for the resignation of big shots right up to the Prime Minister.

Quick learner

Here is a 25-year prison sentence worth of alleged delinquency of the Chairman of the Governing Board of a business school which is expected to set the most stringent standards of ethics, probity, propriety and prudence, and impregnate future business leaders with the right values. In refusing to step down, Mr Gupta has demonstrated that he is a quick learner. He has parroted clichés identical to the ones employed by politicians about the charges being “baseless”. The deafening silence of his business cohorts is a sickening proof of the pervasive spread of the rot to every creek and crevice of the polity. Alas for India!

B.S. Raghavan responds to comments on his article

I was appointed on November 29, 2008, by the Governor of Jharkhand to be the Chancellor of the Jharkhand ICFAI University. It is a statutorily established institution and my appointment was under Section 13(1) of the Institute of Chartered Financial Analysts of India University Act, under the provisions of which the Governor is the Visitor. I received no compensation in cash or in kind other than reimbursement of my air fare between Chennai and Ranchi and the cost of hotel accommodation.

I have resigned from the post on 20/04/2010. I have never had anything to do with any of the business schools run by any organisation other than having been on the Board of Directors of Bharathidasan Institute of Management, Tiruchy, 20 years ago. I am not connected with any of the activities of ICFAI. My only touchstone in selecting topics for my column is public interest and nothing else. To the best of my ability, I check facts and follow the principle of fair-mindedness. At 84, there is no reason why I should entertain any malice or ill-will against anyone or any institution. I don't nor ever shall.

In the context of the column, I wish to add that I had sent an email message on the morning of March 5, to Dr Sriram Gopalakrishnan and Dr Ajit Rangnekar of the Indian School of Business about my intention to write the column, indicating the lines along which I was planning to do so, and saying that I shall be glad to take into account, and even mention in the piece, any comments that they or any spokesperson of the ISB had and that I shall wait till the evening of that day to hear from them. There was no response from them, however, until the morning of March 6 when I submitted the column for publication.

B. S. Raghavan, IAS (Retd)

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