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Wednesday, 6 June 2018

The Hindu Editorial: A Failure Of Governance

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The Hindu Editorial: A Failure Of Governance

Title: A failure of governance 

(Why we need to go through the timeline of the uncalled-for drama at ICICI Bank) 

Context:- Finally, finally, the board of ICICI Bank has ordered a probe into allegations levelled against its CEO, Chanda Kochhar. Does this call for a celebration? No, it doesn’t. The probe comes rather late in the day. 

These constitute lapses in governance at a bank that has been characterised as “systemically important” by the regulator. 

On May 30, the board of directors of ICICI Bank announced that it had ordered an inquiry by an outsider into allegations made by a whistle-blower. 

The publication of Mr. Gupta’s allegations in a newspaper in March this year raised a storm. On March 28, the Chairman of ICICI Bank’s Board, M.K. Sharma, issued a statement expressing the board’s full confidence in Ms. Kochhar. In April, media reports said that Mr. Sharma had carried out an internal inquiry in 2016 itself and had found no evidence of wrongdoing on Ms. Kochhar’s part. End of story, or so the ICICI Bank board would have liked. 

However, the controversy would not die down. Investors and media analysts have been relentlessly pressing the board for a better response. 

Sharp questions 
Three questions arise. First, after having stood steadfastly by its CEO for over two months, why has the board opted for a probe now? Second, is a probe by an outsider required at all? Third, should Ms. Kochhar continue in office during the period of the inquiry? 

The decision to go in for a probe is clearly prompted by widespread dissatisfaction with the clean chit given by the Chairman last March. It is also possible that the board has been rattled(Shake) by show-cause notices issued by SEBI on May 24.
According to media reports, the notices relate to alleged violation of disclosure requirements on the part of both Ms. Kochhar and ICICI Bank. If the violations are established, the bank could be subject to monetary penalties and the associated reputational damage. 

However, the key question, as one veteran banker pointed out to me, is whether an inquiry conducted by an outsider is at all necessary in such a case. Let us recount the salient facts in brief. 

In April 2012, ICICI Bank made a loan of ₹3,250 crore to the Videocon group. Ms. Kochhar was the bank’s CEO at the time. Mr. Gupta’s letter to the PM had said that Ms. Kochhar’s husband had had a business partnership with the Videocon group prior to the sanction of the ICICI loan. 

There would thus be a clear conflict of interest in Ms. Kochhar being party to the sanction of a loan to Videocon. 

A lapse(failure) 

It is not necessary to establish a quid pro quo(advantage) in the relationship for the board to decide whether Ms. Kochhar should step down. 

No deep probe, no forensic analysis, no great legal expertise is required to answer the elementary question posed above. 

The board of directors is perfectly competent to answer it by having the relevant documents placed before it. That is what the board should have done in March when the controversy erupted. 

The conflict of interest does not end with the sanction of a loan. It extends to post-loan monitoring and the readiness of the lender to exit a relationship where problems are brewing. 

It also applies to recognition of a loan as a non-performing asset and steps taken to effect recovery. It was incumbent(necessary) on Ms. Kochhar to have distanced herself from all matters related to Videocon. 

When a fresh set of allegations surfaced this month, the board must have been in a bind. 
Since it had solidly backed its CEO thus far, any probe it chose to conduct by itself would have lacked credibility. Perhaps, that is why the board has opted to entrust the probe to an outsider. 

Now that the board has decided to have a comprehensive probe, one that could stretch over several weeks or months, Ms. Kochhar’s status during the period is an important issue. The board has denied having asked Ms. Kochhar to go on leave. It has said that her current leave had been planned in the normal course. 

Tenuous(weak) arrangement 
Does this mean that she will continue to helm the company on her return from leave? If yes, it is a highly unsatisfactory state of affairs. 

The board has also denied that it has set up a search committee to find a successor to Ms. Kochhar. It is free not to set up one. But the board is certainly bound by regulations to have a succession plan in place. The board must ensure that it has a choice of candidates it can turn to in the event that Ms. Kochhar is required to step down. 

Final Words 
As one distinguished(famous) banker put it to me, “Would the government have shown the same indulgence to the CEO of a public sector bank?” 

Title: Life in plastic

(It’s far from fantastic. India’s framework on discouraging its use is in disarray) (अव्यवस्था) 

Context:- As a major producer of plastic waste that ends up in the oceans, India is arguably the best place to host World Environment Day. Union Environment Minister Harsh Vardhan has said the government means business, and the UN theme, “Beat Plastic Pollution”, will not remain an empty slogan. 

His claim would have inspired greater confidence had India taken its own rules on waste management seriously. Both the Solid Waste Management Rules and the Plastic Waste Management Rules of 2016, which built on previous regulations, mostly remain on paper. 
State governments have simply not given them the necessary momentum, and the producers of plastic articles that are invariably used just for a few minutes have shown little concern about their negative environmental impact. The Centre’s somewhat liberal estimate shows over 60% of about 25,000 tonnes of plastic waste generated daily is collected. 

Ganga-Brahmaputra-Meghna river system is on the UN map of 10 rivers worldwide that collectively carry the bulk of the plastic waste into the oceans. 

The effects are evident: they threaten marine life and the well-being of people, as microplastics are now found even in drinking water. 

In their response to the crisis, communities and environmentally minded individuals are ahead of governments and municipal authorities. They segregate waste, compost at home, conduct “plastic free” social events and help recover materials that would otherwise just be dumped in the suburbs and wetlands. But, valuable as they are, voluntary efforts cannot achieve what systemic reform can. 

Ideally, regulation should help stop the manufacture of single-use plastic articles such as carry bags and cutlery, and encourage the use of biodegradable materials. 

There is a challenge here, though. The provisions of the Plastic Waste Management Rules require manufacturers of compostable bags to get a certificate from the Central Pollution Control Board, but this has not stopped counterfeit products from entering the market. Local bodies mandated under rules to ensure segregation, collection and transfer of waste to registered recyclers have spectacularly failed to fulfil their responsibilities. 

Final Words: 
The State Level Monitoring Committees provided for under the rules have not been made accountable 

India and the world face a plastics crisis. Solving it will take more than slogans.

Definition:

Whistle-blower (noun) = A person who informs on a person or organization regarded as engaging in an unlawful or immoral activity.

Vocabulary words:

Probe (noun) = Investigation, enquiry (तहक़ीक़ात)

Call for (phrasal verb) = Make necessary, require, demand

Relentlessly (adv) = In an unceasingly intense or harsh way (निर्दयता से)

Rattle (verb) = Shake, disturb (परेशान)

Veteran (noun) = A person who has had long experience in a particular field (अनुभवी)

Salient (adj) = Most noticeable or important 

Quid pro quo (phrase) = A favour or advantage granted in return for something

Evasion (noun) = Avoidance (टालना)

Brew (verb) = (of an unwelcome event or situation) Begin to develop

Tenuous (adj) = Very weak or slight (तुच्छ)

Plight (noun) = A dangerous, difficult or unfortunate situation (दुर्दशा)

Coy (adj) = Reluctant to give details about something regarded as sensitive

Fiduciary (adj) = Involving trust, especially with regard to the relationship between a trustee and a beneficiary

Disarray (noun) = A state of disorganization or untidiness (अव्यवस्था)

Letter and spirit = Adhering to /obeying with literal interpretation/wording and the intent/purpose of the law.

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