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Prestige Institute of Management and Research, Indore: Business Ethics and Corporate Governance

1. The document discusses the ICICI Bank scam involving former CEO Chanda Kochhar. Kochhar was accused of corruption related to loans given to Videocon Group. 2. An investigation found that Kochhar's husband had received improper benefits from Videocon's chairman in a quid pro quo arrangement for loans from ICICI Bank. 3. The scam had major impacts on ICICI Bank, including a drop in profits, loss of shareholder wealth, and damage to the bank's reputation. Kochhar eventually resigned in October 2018 before an external investigation was completed.

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151 views15 pages

Prestige Institute of Management and Research, Indore: Business Ethics and Corporate Governance

1. The document discusses the ICICI Bank scam involving former CEO Chanda Kochhar. Kochhar was accused of corruption related to loans given to Videocon Group. 2. An investigation found that Kochhar's husband had received improper benefits from Videocon's chairman in a quid pro quo arrangement for loans from ICICI Bank. 3. The scam had major impacts on ICICI Bank, including a drop in profits, loss of shareholder wealth, and damage to the bank's reputation. Kochhar eventually resigned in October 2018 before an external investigation was completed.

Uploaded by

idris bootwala
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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PRESTIGE INSTITUTE OF MANAGEMENT

AND RESEARCH, INDORE

Subject - BUSINESS ETHICS AND CORPORATE


GOVERNANCE
Class :- MBA FT (A) 4th Semester

Faculty Guide : Submitted By:

Dr.Rashmi Gharia Idris Bootwala


Manas Patni
Deepal Vijayvargiya
Stuti Gupta
Anamika Mangal
INTRODUCTION
 Chanda Kochhar  is the former managing director and chief executive
officer of ICICI Bank. However, on 4 October 2018 she stepped down
from her position following allegations of corruption. Amidst
investigations related to Videocon bad loans, she was forced by the board
of ICICI Bank to take indefinite leave.
 She was the first woman to head an Indian bank, having fought
out one of the toughest succession battles in corporate India.
Personalities involve in the
scam
DETAILS ABOUT SCAM
 March 2016: Shareholder activist Arvind Gupta, who is also the founder
and trustee of Indian Investors Protection Council, writes to Prime
Minister Narendra Modi on March 15, 2016, red-flagging "the illicit
banking and commercial relationship between Videocon
Group of Venugopal Dhoot and ICICI Bank's MD & CEO Chanda
Kochhar's family".

 July 2016: The RBI conducts a detailed probe into the matter after
the Prime Minister's Office referred the allegations of Kochhar's
husband, Deepak, reaping windfall gains from his association
with Dhoot, whose company was a large debtor to ICICI Bank.
 March 2018: While the country is still reeling under the Rs 13,000 crore
PNB-Nirav Modi scam, the mainstream media picks up Gupta's blog
post, and this time the matter makes major waves.

 But before the end of the month, ICICI Bank's board reviews the bank's
internal processes for credit approval and declares them robust.

 But on March 31: The Central Bureau of Investigation kicks-off a


preliminary enquiry against Deepak Kochhar to look into the
allegations.
 April 2018: Facing allegations of improper conduct Kochhar, who had
headed the country's third-largest lender since May 2009, backs out of
the annual session of FICCI Ladies Organisation, where she was to be
felicitated by President Mr. Ram Nath Kovind

 May 2018: The Securities and Exchange Board of India (Sebi) sends a


notice to Kochhar, seeking her response on the alleged non-compliance
with disclosure norms in dealings with the Videocon Group and
Nupower Renewables, a company co-founded by her husband.
 June 2018: ICICI Bank appoints former judge of the Supreme Court BN
Srikrishna to head the external probe into the allegations of corporate
misconduct against Kochhar.

 October 2018: In a sudden development Kochhar resigns from her


position, even before the Srikrishna panel submits its report.

 January 2019: The CBI books Kochhar, her husband and Dhoot for
alleged cheating and corruption in sanctioning loans to the Videocon
Group, which caused a loss of Rs 1,730 crore to the bank.
IMPACTS ON THE COMPANY
 ICICI Bank’s shares underperformed the Nifty since Kochhar’s
troubles began at the end of March and continued till her going on
leave around mid-June.

 After her exit on October 4, 2018, the stock has significantly


outperformed the Nifty till date.

 The bank, with roots in development finance, has also seen a


massive rise in its sour assets, courtesy mainly on exposure to the
infrastructure sector, along with its peers, which led to a massive
drop in profit in recent quarters
 Selling off stakes in group companies — it listed the life general
insurance arms as well as brokerage businesses in quick succession,
gave it the wherewithal to withstand the high provisioning required
recently.

 Open interest (OI) in the stock futures of Chanda Kochhar-led


ICICI Bank rose 46 per cent to 10.41 crore shares from the
beginning of the March 2018 expiry until March 21, a day before the
newsbreak on the alleged scam.

 During this period (Feb 23-March 21), ICICI Bank’s stock fell 14
per cent, wiping out nearly Rs 30,000 crore in shareholders’ wealth.
The rise in Open interest, along with a drop in the share price,
implies a build-up in short positions.
 Compared with the unusual 46 per cent rise in case of ICICI Bank,
Open interest in the stocks of other private sector peers such as Axis
Bank and HDFC Bank declined by 13.5 per cent and 1.13 per cent,
respectively, and rose 8.8 per cent and 13.9 per cent, respectively, in
the stocks of Indusind Bank and Yes bank over the same period.

 Implication of the former CEO doesn’t alter the growth path of the
bank. Hence, correction in the stock price, if any, following the
negative news flow around Kochhar presents a great opportunity to
investors to accumulate the stock.

 
Suggestions:
 Practising unethical deeds in corporate let the personnel to pay
in terms of monetary, positional and behavioural.

 If we connect the unethical practices which the former MD &


CEO of ICICI Bank Mrs. Chanda Kochhar with corporate
governance then few factors came in the light such as:

1. Violation of Code of Conduct: This was the allegation by SEBI


against Mrs. Chanda Kochhar that she mainly violated code of

conduct.
2. Ignorance of Conflict of Interest: In case of Mrs. Chanda Kochhar
the unethical practise she had done was ignoring the conflict of

interest & helped her husband for the sanctioning of loan.

 The major suggestions which were being


suggested for this particular case are:
1. While being working in the organisation one must have to
maintain the decorum of the organisation by not violating the
trustworthiness, care, respect & loyalty which organisation &
companies expect & bound to their employees.
Conclusion
 The complete case of Chanda Kochhar is due to the conflict of interests
between the personal interest and the professional interest.

 The arguments are cleverly worded but this is an issue that was never
only about legality. It was about Ethics. Propriety demanded that she
should have disclosed to the board her ‘interest’ in the Videocon loan on
the grounds that her husband had a business dealing with the group.

 Corporate governance is one of the most important differentiators


of business that is distilled from an organisation’s culture, its
policies and ethics, especially of the people running the
business, and the way it deals with various stakeholders.
Continued….
 The learnings from the case are:
 Ethical issues can arise in respect of any kind of business and is an
inescapable fact of business life.

 Describing something as ethical does not mean it is ethically correct.


All business decisions have an ethical aspect.

 Business ethics is a corporate governance tool.

 Lack of business ethics can cost a business that ignores the demands
of business ethics is unlikely to maximize long-term owner value.

 A business which characteristically lies or cheats or breaks promises


is difficult and unrewarding to deal with.
THANK YOU

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