US proxy firm asks ICICI Securities shareholders to vote against Kochhar

The annual general meeting of shareholders is scheduled for August 30

US-based proxy firm Glass Lewis has recommended to the shareholders of ICICI Securities to vote against the proposal to elect ICICI Bank Managing Director and Chief Executive Officer Chanda Kochhar as a director of the company, citing the legal and regulatory issues facing her.

“We note that there are significant legal and regulatory issues involving the ICICI Securities non-executive chair nominee Chanda Kochhar. We believe shareholders should be very concerned about the matters facing Kochhar, which includes her being forced to take a leave of absence from the ICICI Bank board, pending the outcome of the investigation into her conduct,” said the recommendation. 

“While the issues pertain to the company’s parent company, ICICI Bank, the mere fact that she has been forced to take leave may be representative of serious lapses of governance issues that carry reputational risk issues which may negatively impact the company. Given the severity of issues confronting Kochhar, we do not believe shareholders should support her candidacy at this time,” it said. 

The proxy firm said shareholders should be very concerned with the legal and regulatory issues facing the company as such matters could potentially expand in scope and prove to further dampen shareholder value. 

“As such, in the event that members of management or the board are implicated in any such legal proceedings, we may consider recommending that shareholders withhold votes from certain directors on that basis. Nevertheless, we will continue to monitor these issues going forward,” it said. ICICI Bank holds 79.22 per cent stake in ICICI Securities. 

The annual general meeting of shareholders is scheduled on August 30.

Glass Lewis and ISS made headlines recently when they recommended to HDFC shareholders to not elect Deepak Parekh as a director of the company. After this, almost a quarter of the foreign portfolio investors voted against Parekh. Both proxy firms also recommended that shareholders should vote against two other HDFC directors Bimal Jalan and Bansi Mehta as both were older than 75 years, and the former’s attendance in board meetings was low. Both of them resigned before the HDFC shareholders’ meeting.

Kochhar, is currently under investigation by the Securities and Exchange Board of India (Sebi) for a case relating to a loan extended by the bank to the Videocon Group. In 2012, ICICI Bank extended a loan of Rs 3.25 billion to Videocon. After the loan was granted, Kochhar’s husband’s firm, NuPower Renewables, received a Rs 640-million loan from Videocon’s promoter through a series of investment vehicles, allegedly as a quid pro quo. In 2017, it was reported that almost 86 per cent of the loan granted to Videocon remained unpaid and was declared a non-performing asset by ICICI Bank, the proxy firm said.

After denying any conflict of interest soon after the news broke, the ICICI Bank board later set up an independent panel, led by former Supreme Court judge B N Srikrishna to probe all the charges. The board also sent Kochhar on an indefinite leave. 

On Thursday, ICICI Bank Chairman, G C Chaturvedi said in Delhi the board was awaiting the Srikrishna committee’s report to reply to Sebi. On the other hand, after filing a preliminary enquiry early this year, the Central Bureau of Investigation has not made any comments.