Corporate governance experts seek clarity on Chakraborty's HDFC Bank exit

Experts call for an independent directors' committee to probe circumstances behind Chakraborty's exit, citing ambiguity in resignation letter and investor concerns

Corporate governance experts have demanded that an independent directors’ committee of HDFC Bank be formed to investigate the circumstances surrounding the exit of former part-time chairman Atanu Chakraborty.

 

While proxy advisers maintain there are no immediate governance concerns at the bank, the ambiguity of Chakraborty’s resignation letter has triggered speculation among investors.

 

Shriram Subramanian, founder of the proxy advisory firm InGovern, said the current management commentary is neither straightforward nor convincing. He stressed that statements from the current interim chairman and CEO are insufficient to assuage investor concerns.

 

“The board needs to appoint an independent directors’ committee to determine exactly what transpired and provide clarification,” Subramanian said. “We are not clear whether the issue is a personality issue or whether there are any underlying issues. If it is a personality issue, the company should be upfront about it. If they want to call out Atanu Chakraborty, it is fine, but it has to be by that committee of independent directors.”

 

 

The cryptic nature of the resignation, particularly Chakraborty’s alleged claim that the bank’s practices conflicted with his personal values, has cast a shadow over the board’s internal workings, governance experts said.

 

J N Gupta, co-founder and managing director of Stakeholders Empowerment Services (SES), pointed out that the resignation letter’s vagueness has also raised questions regarding Chakraborty’s own conduct.

 

“The chairman leads the board, sets the agenda, and finalises the minutes. If the chairman’s concerns were overruled by the board, they could be documented in the minutes,” Gupta said.

 

Gupta added that independent directors should give a clear view on whether they have similar concerns about developments at the bank, or whether it was a case of differences between the board and the chairman.

 

The controversy has also reignited the debate surrounding former regulators transitioning to the boards of private entities they once oversaw. Chakraborty, a retired Indian Administrative Service officer, had served as secretary, Department of Economic Affairs, in the Ministry of Finance.