ICICI Securities AGM: To Vote Or Not To Vote For Chanda Kochhar
On Aug. 30, shareholders of ICICI Securities Ltd. will vote to decide on the reappointment of Chanda Kochhar as director on the company’s board and hence chairperson too. That puts parent ICICI Bank Ltd., where Kochhar is managing director and chief executive officer, in an interesting position.
If the bank, which owns 79.22 percent stake in the subsidiary, votes in favour of Kochhar, the resolution—that needs a simple majority—will pass. But will a yes vote be interpreted as supporting the beleaguered leader, at a time when she’s under investigation for alleged impropriety in sanctioning loans?
There are strong arguments both for a vote in her favour and against her.
Not Yet Guilty
Multiple investigations are underway into allegations of possible quid pro quo in loans granted by ICICI Bank to the Videocon Group, in light of the dealings between Venugopal Dhoot and NuPower Renewables—founded by Chanda Kochhar’s husband Deepak Kochhar. The bank itself has appointed retired Justice Srikrishna to conduct one, and parallel investigations are on by the Central Bureau of Investigation, Indian market regulator SEBI and U.S. securities regulator SEC. As yet no wrongdoing has been established.
In dealing with the situation arising from these allegations, ICICI Bank has so far preferred to maintain status quo on Kochhar’s leadership. Soon after a newspaper report, on Mar. 29, detailed suspicious transactions between Kochhar’s husband and Videocon, the bank’s board issued a statement saying it has full confidence and reposes full faith in Kochhar. Almost three months later, when faced with more whistleblower letters and mounting criticism, the bank’s board appointed Sandeep Bakshi as chief operating officer for five years. Kochhar went on leave, ostensibly to ensure a free and fair inquiry. But she continued as managing director and chief executive officer of the bank and has retained her position as chairman of key subsidiaries such as ICICI Prudential Life Insurance Company Ltd., ICICI Lombard GIC Ltd., ICICI Prudential Asset Management Company Ltd. and ICICI Securities Ltd.
In voting for her reappointment as director on the ICICI Securities board, the bank, many might say, is simply continuing that policy of status quo.
But Kochhar’s position on the board of ICICI Securities is on account of her leadership role at ICICI Bank. When that very role is under cloud, should the parent persist in allowing her to continue a board leadership position in the subsidiary? Some might say the status quo principle would apply if the bank took no action to dismiss her from the board. But if, when faced with an active choice to vote for or against her, the bank votes for her—can that still be described as maintaining status quo or is it an affirmation of faith in her leadership?
In which case a vote in her favour before the investigation results are in may be construed as premature affirmation or in simple words—poor governance.
If ICICI Bank abstains from voting on the Kochhar reappointment then the resolution’s fate will depend on public shareholders of ICICI Securities—to pass it needs a majority of those present and voting to support it.
Of the 20.78 percent public shareholding, 10.71 percent is held by mutual funds—the largest of which is an ICICI Prudential scheme with 3.82 percent stake in the company. Among others, foreign portfolio investors hold 3.68 percent and retail shareholders 3.2 percent.
Governance advisory firm IiAS has recommended that shareholders should vote against the resolution at the annual general meeting. In a report issued to its institutional clients, IiAS reiterates that Kochhar is under investigation. And that “in a recent SEC filing, the bank has highlighted the possibility of increased regulatory scrutiny and reputational risks from these developments – which could materially and adversely impact operations and financial performance”.
In such a scenario, her presence on the board of ICICI Securities, while legally compliant, exposes the company to the same risks and the possibility of legal and regulatory sanctions. We believe she should be reappointed on the board only after all the charges against her have been cleared.IiAS Voting Advisory Report On ICICI Securities
Another governance advisory firm, SES has recommended shareholders vote in favour of Kochhar’s reappointment. As has foreign proxy advisory firm ISS.
“As such, given that the allegations against Chanda Kochhar have not been confirmed, a vote against her election due to this matter would not be made at this time,” Institutional Shareholder Services said in its report to clients.
BloombergQuint’s email to ICICI Bank inquiring about its stance on the matter has yet to receive a response. It’s unlikely the bank will reveal its hand before its vote is cast. If it’s cast at all.