How the mighty have fallen

The New Year seems to have brought ICICI Bank into the news again for the wrong reason. The year 2018 witnessed two developments relating to two prominent leaders in the banking industry, Chanda Kochhar and Shikha Sharma. These unfortunate episodes raise questions that go beyond the life and times of the leaders in reference.

Why did the extra-ordinarily well paid business leaders resort to business practices that appear highly questionable? Is it symptomatic of the insatiable desire for wealth in our society today? Of the desire to get into the record books of the wealthiest Indians?

If Kochhar is proven guilty of the inappropriate loans that the bank is alleged to have made under her watch, does it mean that leaders of private banks should be considered as vulnerable to the lure of wealth as some of their public sector counterparts? What does that mean for those observers who have been advocating privatisation of beleaguered public sector banks as the panacea for all their maladies?

There is an unfortunate irony here. Both Kochhar and Sharma started and grew their careers at ICICI, an institution that has been an essential part of the development of not just the financial sector but that of the Indian economy as a whole.

Privileged place

The only development bank that was not entirely state owned, ICICI enjoyed a privileged place among the troika of institutions that it was a part of, the others being Industrial Development Bank of India (IDBI) and Industrial Finance Corporation of India (IFCI).

IDBI bit the dust recently, saddled with the bad decisions of an inept leadership. IFCI, for long the sick man of this cohort, was made a part of Punjab National Bank. ICICI had a different lineage of leadership and history from IDBI and IFCI. Led by stalwarts like the late HT Parekh, it enjoyed no less a stature in the financial sector than State Bank of India (SBI).

ICICI pioneered many initiatives in India such as the first credit rating enterprise, the first over-the- counter stock exchange, the first independent venture capital company and so on. As the development bank that first converted itself into a commercial bank, it emerged as a challenger to the state-owned SBI that had been around for much longer as the Imperial Bank of India.

Its remarkable success was the result of an organisational ethos and leadership legacy that had been cultivated over many decades, in spite of the significant presence of the government on its board of directors and in spite of its having to serve as an instrument of public policy.

Raised in the high banking traditions of ICICI, both Kochhar and Sharma were remarkable business leaders. Kochhar was held up as a shining example of excellence in leadership among women.

Although less visible than Kochhar, observers of the financial sector would know that Sharma’s rise in ICICI was no less meteoric until she eventually migrated as CEO of Axis Bank after she lost the leadership race at ICICI to Kochhar.

How did the ICICI throw up two leaders who irreparably damaged their own reputation and that of the storied institution that she led in the case of Kochhar? Is it possible that this mess was in the making at ICICI for much longer than we can all see? Will we ever get to know when this rot started? If it did not start under Kochhar’s leadership where will this trail of apparent malfeasance lead us to?

One is reminded of the thesis of an interesting book, aptly titled The Fish Rots from the Head , by Bob Garratt. The decay in an organisation starts at the very top. It must be as true for ICICI as it is for any other modern corporation that the responsibility for the rot has to be placed where it belongs: The board and the leadership team that set off the decline in standards.

Sleuths will investigate the financial transactions in question. And some more. Debates will rage about whether the officials at ICICI were culpable and to what extent. Punishments will probably be meted out to the deserving or to some unsuspecting scapegoats. But the reputation of the two leaders and the institution where they built their careers will have suffered an irreversible damage, no matter what the outcomes of the investigation are.

As with every other crisis this is perhaps as good a time as any for ICICI, starting with the very top, to ask itself where and when did the rot start. And what lessons can the bank learn from this sorry turn of events.

The writer teaches at a business school

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