Proxy advisory firm Institutional Investor Advisory (IiAS) has asked shareholders to oppose the proposed reappointment of Chanda Kochhar, MD and CEO of ICICI Bank, to the board of ICICI Securities (I-Sec). The IiAS recommendation comes on the back of an ongoing inquiry against Kochhar’s alleged role in extending a loan of more than ₹3,000 crore to conflicted parties.

IiAS believes that ICICI Bank will continue to have representation of its interests on the I-Sec board even without Kochhar, as Vishakha Mulye, Executive Director of bank, is on the board of I-Sec. According to IiAS, I-Sec should not be exposed to any reputational risks and regulatory scrutiny due to Kochhar’s appointment in case of any adverse developments against her in the future.

Reputational risks likely

In a recent filing to the US securities market regulator SEC, ICICI Bank said there was 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 (Kochhar’s) presence on the board of I-Sec, while legally compliant, exposes the company to the same risks (as highlighted by ICICI Bank to SEC) and the possibility of legal and regulatory sanctions. We believe she should be reappointed to the board only after all charges against her have been cleared,” a report from IiAS said.

Kochhar, against whom a whistleblower had levelled serious charges, is currently on leave of absence from ICICI Bank since June pending outcome of the inquiry ordered by the bank. The CBI has registered a preliminary inquiry (PE) into alleged nexus between Chanda Kochhar’s husband Deepak Kochhar and Videocon Group Chairman Venugopal Dhoot. It is alleged that Dhoot provided crores of rupees to a firm promoted by Deepak Kochhar and two relatives six months after Videocon received ₹3,250 crore as loan from ICICI Bank in 2012.

SEBI has issued a show-cause notice to Kochhar and ICICI Bank for failing to disclose the conflict of interest. SEBI mandates companies to prepare a code of conduct specifying disclosure norms with regard to conflict of interest.

Other legal experts following the matter told BusinessLine that if Kochhar was forced to go on leave from ICICI Bank due to the pending probe, how is it that she could represent the interests of the bank on the board of another company? Further, there is a view that ICICI Bank can always get Kochhar appointed to the I-Sec board once she is cleared by the inquiry, and there will be no loss on account of her not being on the board.

Another proxy firm Shareholder Empowerment Services (SES) said it was in favour of Kochhar’s appointment.

“SES has given a recommendation for voting in favour of Chanda Kochhar as till date there has been no regulatory action against her and the committee looking into it has not given its findings. SES, as a matter of principle, considers only confirmed regulatory action or any misconduct,” said JN Gupta, founder promoter, SES

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