Thursday, September 03, 2015

Corporate Governance at its best or Gender Bias at its worst?

23rd of August saw the resignation of Smt.Ireena Vittal, an independent director, from the Board of Axis Bank Ltd. The bank says that she resigned voluntarily because of perceived conflict of interest arising from Kotak Mahindra Bank partnering with Bharti Airtel in pursuance of permission given by RBI to Bharti Airtel to start a Payments Bank. Her husband, Sri Gopal Vittal is now CEO of Bharti Airtel. Gopal Vittal had earlier earned his spurs at Hindustan Unilever Ltd.

Is there a conflict of interest in this situation? If we apply Chidambaram or Sushma Swaraj standard, there is absolutely no conflict of interest either in this or for that matter any other situation. But persons like Ireena Vittal or companies like Axis Bank are of a different breed and they are of the view that actual or potential conflicts of interest do matter.

However, there is an interesting riddle here. If there is conflict of interest, the resignation is legally and ethically mandated and therefore not voluntary. If there is no such conflict, the resignation is unwarranted.

Deepak Parekh and M.Damodaran have gone on record that notions of any conflict of interest in this case are far-fetched. Of course, they are not the ultimate arbiters, especially the former who has spoilt his reputation through his inaction and silence in the TERI episode involving R.K.Pachauri. (It is extremely regrettable that according to TERI's website, RKP continues to be its Director General.)

Smt.Rama Bijapurkar who was earlier an independent director in Axis Bank has raised an issue which is of serious concern. She claims that Vittal resigned after some directors in Axis Bank raised the conflict of interest question. If the claim is true, it smacks of indefensible gender bias if similar standards are not applied for male directors.

If a person resigns a job foreseeing conflict of interest, the act should normally be applauded. Axis Bank and Smt. Ireena Vittal should together clarify what really happened. 

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