Directors overwhelmingly are dependent on the information that the CEO chooses to provide or conceal. As a result, independent directors suffer from вЂњinformation captureвЂќ. Second, as the same individuals serve on multiple boards, they have limited time to really understand and investigate the true situation in the firm as well as inadequate industry specific knowledge. The unconscious story line that plays out on the board: вЂњWho are we to question a visionary like Ratan Tata, Narayan Murthy, or Chanda Kochhar?вЂќ The board in the face of this CEO is rendered ineffective in its monitoring role.

I will leave the readers to make their own judgment as to which of these were in play at ICICI as the board lost all control and abdicated its responsibilities.ДЇirst, is the problem of the вЂњsuperstarвЂќ CEOs, who through a combination of past performance, charisma, and crafty PR management have created an aura of a dominant personality. Over the years I have observed powerful CEOs deploy various mechanisms to make their boards and Chairman subservient. The worry in non-promoter companies is that an all-powerful CEO captures the board and subverts any effective oversight. Since a powerful Chairman acts as a check on the CEO, at least on the boards outside India that I have served on, there is often a healthy tension between them. It is why in the USA, where such firms are ubiquitous, a separation is sought between the chairman and CEO positions. Without a promoter to oversee their behaviour, the professionals running the firm can enrich themselves at the expense of the shareholders. In non-promoter led companies, one worries about the agency problem, where the managers may not align their interests with the shareholders. But, as in any feudal system, the minions are at the mercy of the ruler. The savvier promoters, who take a long view, and are thus protective of their reputation vis-Г -vis minority shareholders. The informal check in such cases is only the benevolence of the promoters, as I have previously noted, if they need to return to the equity markets. The promoter is all powerful and minority interests are trampled upon at will.

This has chilling effect on dissent by independent directors. If an independent director, such as a Nusli Wadia, dares to disagree with the promoter, he or she is immediately sacked.

As promoters can vote on independent directors, and minority shareholders infrequently exercise their voting rights, even with a relatively small shareholding, the promoter is effectively appointing the independent directors. The problem of corporate governance in promoter led companies is that the board kowtows to the promoter as the вЂњindependentвЂќ directors owe their positions to these promoters. Let us distinguish between promoter and non-promoter led (diversified stockholding with no controlling shareholder) companies for the purposes of corporate governance. If the chairman, CEO, or the members of the board of ICICI continue after this fiasco, it indicates that even вЂњshameвЂќ as a control mechanism has limited efficacy in the country. In the other recent board battles in India, most famously at Infosys and Tata, at least there were some heroes to emerge from a corporate governance perspective such as R. ICICI Follows Infosys & Tata Board Battles It has sullied the reputation of everyone associated with it, the Chairman, the CEO, the independent directors, and the government nominee directors. Sharma, has managed to make themselves the poster child for poor corporate governance in India. But the ICICI board under the inept leadership of its Chairman, M.K. It is not often that the failure of a board of directors spills so openly into the public domain.

Subvert board