Thursday, February 17, 2022

NSE affair: question marks over the role of board and SEBI

Corporate shenanigans have failed to surprise. But the National Stock Exchange (NSE) story is in an India-class of its own. Former NSE MD Chitra Ramkrishna, according to a SEBI order, shared confidential information about the exchange and took instructions or guidance from an anonymous email id whom she ascribed to a Himalayan yogi. 

The guru syndrome is all too common in India. As long as this is about one's personal issues, nobody can have a serious quarrel. But the notion that NSE board papers, financial data, performance appraisals and appointments could be shared with a yogi has people shaking their heads in disbelief.

NSE MD Vikram Limaye is set to have met Finance Ministry officials in connection with the SEBI order against NSE, Chitra Ramkrishna and others. This is the surest indication that the Ministry is not convinced that matters can be left to SEBI and the board any more.

The board was made aware of the blatant nepotism implicit in Ramkrishna's appointment of Anand Subramanian as Chief Strategic Officer and, later, as Group Operating Officer, on a stratospheric salary. It was also made aware of her sharing confidential information with somebody who, she claimed, was a Himalayan yogi. Yet, instead of acting against Ramkrishna, the Board allowed Ramkrishna to resign and, that too, with generous payments. This is certainly a serious lapse on the part of the board.

Even earlier, there must have been plenty of talk within NSE about Subramanian's role. It is hard to believe that the board did not pick it up. And if it did, why was there no response? NSE is a public institution. Using NSE to confer pecuniary rewards on an individual, without adequate basis, is abuse of office and misuse of public resources. I am not competent to say so but, perhaps, it could attract the provisions of the Prevention of Corruption Act.

Within NSE staff itself, did anybody protest? Did any of the top officers, including the HR head, raise questions? Unlikely. In the authoritarian world of corporates, serious dissent is unthinkable. 

SEBI's role has also left much to be desired. According to media reports, SEBI was alerted to Subramanian's appointment by whistle-blowers. It should have investigated the matter and taken action. It did not. Besides, imposing fines and barring people from the market is just not enough in this situation. 

As many have pointed out, after the emails with the yogi became known, SEBI should have made every effort, through the cyber police, to track down the identity of the yogi. Since confidential information involving a public institution was shared with an unauthorised individual, it should have filed a complaint with the police. It should have hauled up the then board members for the lapses pointed out above. There is a case for naming and shaming individuals in such instances and there is also a case for barring individuals from holding board positions. Today, board members can fail to  discharge their fiduciary responsibilities and just get away with it. SEBI needed out to send out a message that this can't go on.

At the time of writing, there are reports of an Income Tax raid on Ramakrishna and Subramaniam. This does suggest that the government does not intend to let matters rest with the SEBI order. Sadly, the government has to intervene because neither the board nor SEBI is seen to have done the needful. This highlights a basic fact of governance: Governments are subject to a modicum of democratic accountability in a way in which boards and regulators are not.

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