One significant, but unfortunate, fallout of the cleaning up of the banking sector mess and disciplining the crony capitalists is that after four years almost all forms of institutional structures stand discredited.Government ownership of corporations is blamed for pampering the favourites and breeding inefficiencies, private sector is accused of acting like a cosy club of the elite, while a quasi state-private model like that of Infrastructure Leasing Financial Services (ILFS) is accused of being a wolf in sheeps clothing.When the popular belief was that it was the state-ownership that lulled the management of Punjab National Bank to be complacent that led to the Rs 13,000-crore Nirav Modi scandal, there were charges of favouritism and quid pro quo deals against ICICI Bank Chief Executive Chanda Kochhar.Just as the dust was to settle, the regulator got into the act to stall the re-appointment of Rana Kapoor as the CEO of Yes Bank.
Amid all this, the once revered ILFS defaults become public knowledge, putting the banking and debt markets on the edge with Rs 91,000 crore outstanding.There is yet another chorus thats highlighting the regulatory failure on all fronts.
With extraordinary powers to do things, what were they doing Isnt it their fault not to have stopped the mess right at the beginning Didnt they have access to all the information that the market did not have Isnt it their responsibility to alert the marketIt is an assortment of people and institutions that stand exposed in this.
In this era of instant justice and summary executions on various media platforms, almost every individual associated with any of these institutions at the top level is looked at as a crook.From a laymans position, every one of the arguments will appear to be true.There may have been actions done with a motive to cheat and there could have been decisions taken with a business approach that turned bad.
All bad decisions are not necessarily corrupt ones.Given that every institutional structure is populated by individuals, it is the quality and values of individuals that need the attention than on the structures per se.The concept of independent directors cropped up with a faith that they would act as custodians of minority shareholders and remain a check on the management.
With the board positions determined more by the association with the top management, a majority of independent directors failed the concept.
With perks beyond their expectations, they were beholden to the management thats pampering them.Is it the negligence of people who were supposed to guide these institutions, or a reflection on private enterprises which is theoretically supposed to be more efficient, which also means going bust when business turns sour and returning whatever capital that is remainingFor proponents of state ownership, this is time to cane the private enterprise model saying they are the robber barons, even if helmed by the so called professionals.
Have the professionals let down their champions No doubt.
They have possibly done more harm to the economic fabric than crony capitalists.Amid this din of corruption stand many tall professionals and entrepreneurs such as Tata Sons N Chandrasekaran, and HDFC Banks Aditya Puri, who have not only built institutions but have also enriched shareholders and remained relevant for the economy.The clean-up has exposed the rotten apples in private sector, but there is little alternative than letting private enterprise thrive to create livelihoods.Winston Churchill said: Democracy is the worst form of government except for all those other forms that have been tried from time to time.
The same applies to private enterprise as well.