In a sort of sequel to the resignation of Vijay Shekhar Sharma from Paytm Payments Bank, former Central Bank of India Chairman Srinivasan Sridhar, retired IAS officer Debendranath Sarangi, former Executive Director of Bank of Baroda Ashok Kumar Garg, and Retd IAS Rajni Sekhri Sibal have joined the Board as Independent Directors.
It is naively believed that independent directors are supposed to have no axe to grind, and are the answer to executive excesses and plundering. The truth is that independent directors are also often found wanting, and we have seen that both in India and abroad. The Enron scam happened in the US under the very noses of who’s who in business and politics sitting as independent directors. Ditto for the more recent startup Theranos promoted by Elizabath Holmes.
In India, memories linger even now of what happened in 2008 in Satyam Computers Limited. Ramalinga Raju its promoter forged fixed deposit receipts to account for fake and exaggerated sales, hoodwinking everyone including independent directors until the vigilant investors in NASDAQ of Satyam’s American Depository Receipts (ADR) got wind of the window dressing and voted with their feet.
The short point is if the hands-on executive directors are often greedy, the far-away independent directors attending only periodic board meetings have no skin in the game and are found to be indifferent. The constitution of audit committees drawn largely from independent directors hasn’t worked either, due to apathy. The only institution that could be counted upon to deliver is the auditor — but sadly auditors across the globe have been suffering from credibility crisis, the crisis of confidence.
The RBI should not therefore be taken in by the board reshuffle of Paytm Payments Bank. If the RBI suspects facilitation of large-scale money laundering, its choice should be only one — asking ED to do an expeditious investigation. One hopes the government does not do an encore of Satyam and hand over an otherwise good company with a large client base and infrastructure to someone else for a song. Tech Mahindra happily bought Satyam. One fears the government might have already started looking for a knight in shining armour.
S Murlidharan is a freelance columnist and writes on economics, business, legal and taxation issues
