Wednesday, August 08, 2018

Karunanidhi: Self-made, strong-willed and self-centred

Call him Dakshinamurthy (his original name) or Karunanidhi. Both names fit him to a T. He was one of the most popular leaders in the south and among the South (North-South divide in terms of economic disparity.) He was compassionate towards the downtrodden and the marginalised.

He did not have parental support, unlike his children or grandchildren , to lend him a hand either in politics or in filmdom. He did not have a godfather to proffer preferential treatment to him in cinematic or literary or political world.

His determination to succeed was phenomenal. After Annadorai's untimely demise, he rode roughshod over Nedunchezhian and Anbazhagan to seize control of the party and ministry. Neither Navalar nor Perasiriar was any match to him in scheming or steely determination to capture power. Kalaignar was totally result-oriented. He proved to be a capable administrator and a convincing speaker. His letters to his 'udanpirappu' in Murasoli were a delight to anyone interested in Tamil. His interpretation of Thiruvalluvar's masterpiece written as 'Kuraloviyam' was creative though many would disagree with his views.

He was self-centred to the hilt. When the Congress leaders wanted to bury Kamaraj at the Marina, he denied permission as Chief Minister. He would have thought, "If I permit Kamaraj, where would I go and rest?" He would scarcely have thought that two other equally popular leaders - MGR and Kalaignar's bete-noire, Jayalalitha - would precede him in occupying the Marina.

The TamilNadu government was against his burial at the Marina. The Madras High Court in a hasty judgement that has less to do with law and more to do with the anxiety to ensure law and order vetoed the government decision.

There was no doubt about his popularity and his ability to nurture the DMK. However, his self-centredness arrested the continued growth of his party. He did not mind losing Vaiko when he was at his best from the party because Vaiko was a threat  to Stalin. He wanted his family members to lead the party.

Politics will be less colourful with his demise. Tamil enthusiasts have lost a mesmerising orator.

Wednesday, August 01, 2018

Director remuneration

Shareholders are becoming increasingly sensitive to payment of exorbitant commission and sitting fees to non-executive directors and unconscionably high salaries to executive directors. Shareholders' ire is reflected in the questions raised by them in AGMs.

In the case of IDFC Bank, many shareholders pointed out that enhancing the already high remuneration to directors especially when the company's performance is deteriorating does not make sense. Rajiv B Lall, the Managing Director, responded that he would take what the shareholders permitted. It was not clear whether this was a smart response to silence the vocal and helpless shareholders or a serious and well-meaning response. This was not tested by any shareholder.

Some shareholders suggested that directors on their own should cut down payment to themselves without any prompt from shareholders. Of course, it was all a drama. There was no impact. Accountability of directors, executive or non-executive, continues to be a myth in India.

Tuesday, July 31, 2018

IDFC Bank: Board capture by MD?

Rajiv B.Lall, CEO & MD of IDFC Bank is a very articulate person. He makes exhaustive presentations about the bank in AGM. He is the founder MD of the bank.

The bank, an offshoot of IDFC, is only 4 years old. Its performance is lacklustre and this is amply reflected in its financials. Sensing that some drastic steps are needed to change the bank's fortunes, he angled for the bank's merger with Shriram group. The talks floundered and now merger with Capital First seems to be on.

Merger is a policy decision and therefore must have been debated upon extensively by the Board. In the bank's AGM on July 31st, all questions raised by shareholders were answered only by the MD irrespective of whether the questions related to policy or operations. This was surprising because there are some eminent members in the Board.

This only means that Lall has effectively captured the Board and his writ runs all over. After the merger, he becomes non-executive Chairman. V.Vaidyanathan, the promoter of Capital First will be the MD & CEO. If Vaidyanathan is as eloquent and assertive as Lall, interesting developments may be seen. Whether it is good for the bank remains to be seen.

Thursday, July 19, 2018

Sundaram Finance vs Cholamandalam Finance

Sundaram Finance and Cholamandalam Investment & Finance Co. are the two main NBFCs in Chennai. Following partial comparison is based on their 2017-18 annual reports. Does this communicate something? (Figures of Sundaram Finance appear first.)

                                                                                     

1
Net Profit (Rs.crore)
532.95
974.12
2
Earnings per share (Rs.)
 47.97
  62.32
3
Dividend increase over last year
  4.3%
  18.2%
4
Payment to non-executive directors (Rs.lakh)

126.95
62.22
5
Payment to whole-time directors as percentage of ceiling
12.84
 1.33
6
Total managerial remuneration as percentage of ceiling
13.07
 4.18
7
Remuneration to CFO (Rs.lakh)
164.08
123.12

Monday, June 18, 2018

ICICI Bank's laughable statement

ICICI Bank's Board has said, "In line with the highest levels of governance and corporate standards, Ms. Chanda Kochhar has decided to go on leave till the completion of the enquiry as announced on May 30, 2018.
The Board has noted and accepted this."

This is indeed funny. The Board continues to be servile to the bank's MD & CEO. Chanda Kochhar has suddenly discovered that there is something like governance and corporate standards.

The Board has lost an opportunity to prove its undying loyalty to Chanda Kochhar by refusing her 'offer' to go on leave. The Board must have responded by reminding her that the bank cannot survive without her at the helm. 

Sunday, June 03, 2018

Cost of defending Chanda Kochhar

ICICI Bank continues to pay a heavy price because of its crude attempts to defend its MD. M.K.Sharma whose reputation was uncompromised till he gave (or was forced to give) a clean chit to Chanda Kochhar, is reported to have decided not to seek another term as non-executive Chairman after his present term expires on June 30th.

The Board (or should we say Chanda Kochhar) is actively looking for his replacement. A newly appointed Director, M.D.Mallya seems to be the most likely replacement. This also raises suspicion as to why he was taken in as a Director. Was the intent to make him the Chairman? Is there an undisclosed motive in the recent appointments of Radhakrishnan Nair and M.D.Mallya as 'independent' directors?

The Economic Times reports that many reputed industrialists and former bankers have declined to join the ICICI Bank Board because of the controversy surrounding Kochhar. Is she indispensable to the bank? Is it worth sacrificing governance norms and forgoing services of eminent possible directors in order to enable a person to sustain her position in the bank?

ICICI Bank ought to know that it is an international bank and therefore ethical standards expected of it are way above what we expect from a sole-proprietorship enterprise.

Power of ICICI Bank

ICICI Bank is among the largest private sector banks in India. Its influence in government and related circles seems to be strong and toxic. The Indian Express has reported that all newly-appointed members of BBB barring one have connections with this bank.

Recently in the first week of May, one Mr. Radhakrishnan Nair was appointed by the bank as an additional Independent Director. It remains moot if this was done after coming to know that SEBI was about to question the bank regarding recent developments. Mr.Nair had earlier worked as an Executive Director in SEBI. Wheels within wheels?

Reports suggesting that Chanda Kochhar has been advised by the Board to go on leave created hopes that the bank was perhaps not all that averse to adherence to principles of governance. These incipient hopes were dashed when the bank clarified that the Board has not tendered any such advice. We should have been wiser. How would the Board which is a convenient creation of the MD ask its creator to go on leave? Indications are that we have not yet heard the worst about the bank.