Corporate Governance

Why in News?

• Recently, Chanda Kochhar (Ex-ICICI Bank CEO) serves as a cautionary tale of the dangers of greed in the corporate world.

Highlights

• The Central Bureau of Investigation (CBI) has alleged that ICICI Bank had sanctioned credit of Rs 3,250 crore to the companies of the Videocon Group promoted by Dhoot in violation of the Banking Regulation Act, RBI guidelines, and credit policy of the bank
• Corporate governance, which refers to the system of rules, practices, and processes by which a company is directed and controlled, plays a crucial role in ensuring that businesses are run ethically and in the best interests of their stakeholders.
• One of the key responsibilities of corporate governance is to prevent corporate greed and ensure that businesses are operated in a responsible and transparent manner.
• By enforcing strong ethical standards and holding individuals accountable for their actions, corporate governance can help to curb greed and protect the interests of shareholders, customers, and the broader community.
• The challenge of managers potentially enriching themselves at the cost of shareholders e.g., the recent case of former ICICI bank head Chanda Kochar approved a loan to Videocon for a quid pro quo deal for her husband.
• Lack of diversity of experience and background represents a major area of weakness for these boards. There have been questions about the board performing in the larger interests of the shareholders.