The last one has heard of disembodied voices helping humans in distress to tide over a critical moment in the battlefield or to unknot a tricky issue, such as whether the king should have his son trampled by an elephant as punishment for violating the code of conduct for a prince, was in the epics and fables, which recounted happenings in a different age (yuga).
To be informed that in the age of artificial intelligence (AI) and metaverse that the chief executive officer (CEO) of a leading organisation that had (and has) the highest volume of electronic stock trading in the world relied on the advice of an agency that lacked any physical existence but was only accessible through an email identity. This is the stuff of staggering stultification that would draw sneers from a 10-year-old, should she accidentally eavesdrop on a conversation between two corporate lawyers dissecting the order dated 11th February, scripted by a whole-time member (WTM) of the august body that calls itself the Securities and Exchange Board of India (SEBI).
Corporate scandals are routine in this part of the world—perhaps in others as well. But the kind of fictional filth that fills almost 200 pages storms one’s notion of professionalism and basic good conduct expected of anyone. Much the nastier, when coming from highly paid and highly decked executives forming the crème de la crème of the society!
The details in their diabolic digressions have already flooded the news wires in the past two days. Many of the critical evidence and compromising communications have been crowding the pages of most dailies. Repeating them and narrating the story yet again might be like carrying coals to Newcastle as the sordid saga is no litany of the Lord that enhances the merit of the listener every time it is repeated!
This brief critique is an agonising examination of the multiple fault-lines in the functioning of the various dramatis personae, partly, but not adequately, admonished and accounted for in the order referred to above.
SEBI had identified certain personnel as accused and dealt with their role in the irregularities identified in the functioning of the organisation. In judicial proceedings, its amplitude to moralise and sermonise is quite limited.
Actually, SEBI should be the first accused in the notice for its failure to effectively play its role as a protector of investors’ interest. Its demeanour to assume a role after all hell breaks loose and play the reluctant reformer of the recalcitrant corporate community baffles every individual, who has lost money due to the shenanigans in the corporate world.
Its failure was evident in cases like the collapse schemes of the Franklin Templeton Mutual Fund and repeated corporate scandals exposing the shortcomings of credit rating agencies (CRAs) and other functionaries mandated to protect investors’ interests.
An agency like a stock exchange is unarguably the lifeline of the country’s financial markets and deserves a system of scrutiny that ensures zero errors and not a stand-offish style of “let the problem arise, and we shall deal with it” approach.
While there is no atonement or attenuation for the gross misconduct of all the internal functionaries of the National Stock Exchange (NSE) in the episode, SEBI’s indifference to step out of its crease to play an active and aggressive oversight role of engaging with the company’s top management and the board to sense the culture and commitment of the organisation to uphold the best principles of leadership, demonstrating ethics and values that the organisation seeks for companies listed on its board for trading, is, unfortunately, most evident.
Having touched upon the gaps in SEBI’s role, the NSE board’s complete failure in not identifying an issue which was almost like a raging fire in the dead of night. However, SEBI’s readiness to hush up the matter, even when it was brought to its notice, is unpardonable. It completely defeats all the regulatory rigour prescribing the role of the board for effectively upholding the ethics and good conduct that is basic for any organisation to exist.
The board had public interest directors (PIDs), a term that conjures higher expectations of its purpose and effectiveness than independent directors in regular companies. The persons responding to the above description were individuals of the highest distinction and credentials. Any reference to their names will only serve to twist a knife in the sores and no value may be added beyond besmirching their names. Of course, the details are reproduced in the order.
Their collective failure to exercise any restraint on the appalling conduct of senior officers is reminiscent of the mute presence of the many wise seniors in the Hastinapur court of the Mahabharata when a lady’s modesty was being casually violated! At least those seniors squirmed in their thrones and closed their eyes to avoid a sight that might have haunted them all their lives.
The PIDs, in this case, collected their sitting fees and washed their hands off because the management and the secretarial auditor could finally rationalise and reconcile the misdeeds and find specious explanations for what was stark and shocking to anyone just cursorily perusing the order.
One of the features of this company that is often encountered these days is the continuance of a former managing director (MD) of the company as vice-chairman (VC). This practice of companies to find a place for retired top executives in the board entirely defeats the concept of retirement. The idea of retiring and rotating the top echelon is to get a new incumbent to challenge and revisit old practices.
Making a retired MD a VC is worse than keeping the MD going till the divine summons arrive! The untenable logic is continuity with change! While a perfect political slogan, as commercial practice, it is patently detrimental!
In summary, the plot, in this case, transcends typical corporate scandals like Ponzi schemes, diversion of loans, and related-party preferences and enters a space typically reserved for an adults-only movie or a novel of Irving Wallace!
It is best to leave the rest unsaid.
(Ranganathan V is a CA and CS. He has over 43 years of experience in the corporate sector and in consultancy. For 17 years he worked as Director and Partner in Ernst & Young LLP and three years as senior advisor post-retirement handling the task of building the Chennai and Hyderabad practice of E&Y in tax and regulatory space. Currently, he serves as an independent director on the board of four companies.