Corporate Governance: A Few Recent Readings of Mine

Over the past month, I have been following three significant developments in the corporate world, as reported in the public domain by various media sources. While there could be more such instances, these three stand out due to their striking similarities.

Corporate Governance: A Few Recent Readings of Mine

1. IndusInd Bank:
   As the fifth-largest private sector bank, IndusInd Bank has found itself in the midst of a storm over alleged insider trading by top officials. These officials, during their tenure, had privileged access to sensitive financial information, which they reportedly exploited for personal financial gain. In addition, the bank is under scrutiny for accounting irregularities, resulting in an estimated loss of nearly ₹2,000 crore. Further concerns have arisen regarding the improper accounting of interest, which was not in line with regulatory norms. Regulatory bodies are actively investigating these matters from various perspectives, yet the underlying issue remains: all is not well with the bank. The officials allegedly involved have resigned, and the Securities and Exchange Board of India (SEBI) has barred them from participating in the capital market.
2. South Indian Bank:
   The century-old South Indian Bank has faced governance concerns related to its CEO and Executive Director (ED). The bank’s auditors flagged expenditures incurred by these officials beyond their sanctioned authority in the annual accounts. Such expenditures require either prior approval or subsequent ratification by the board, and in this case, the board refused to ratify them. As a result, the officials are now expected to reimburse the bank. Additionally, the CEO did not adhere to prescribed norms while appointing a key managerial personnel. The board objected, leading to the removal of the individual from the bank. However, the same person was later reinstated in a slightly lower-ranking position that did not require board approval—a move that the board did not view as an act of propriety.
3. Genzel Engineering:
   In the manufacturing sector, Genzel Engineering is currently under investigation for alleged financial misconduct by its two promoter brothers. Reports indicate that they diverted company funds, which were meant for business purposes, to personal use. This act is being examined as a case of financial misuse and embezzlement. SEBI has barred the two brothers from the capital market, and other investigative agencies are scrutinizing the possibility of fraud and regulatory violations.

The Common Thread: Corporate Governance Failures

All three cases highlight serious lapses in corporate governance. Why did corporate governance fail in these instances? Has personal greed taken precedence over organizational needs and ethical norms? How can we ensure and assess the maturity of key managerial personnel, who occupy top positions and are responsible for driving long-term sustainable performance?

One of my professors used to say, “Questions remain the same; only the answers change.”