Sucheta Dalal
Retirement Planning

Stock exchanges are chasing retired bureaucrats with offers of directorships

The babus have never had it so good. A few years ago, every secretary of the government of India used his/her pre-retirement years to lobby for a post-retirement sinecure. Regulatory bodies have been their favourite destinations, because they ensure a continuation of power and clout over all the people that matter. Now, their working life is extending beyond that phase as well. Senior bureaucrats are discovering that their sarkari jobs have become an important asset in landing lucrative directorships. That is because professionally run bodies, such as stock exchanges, are chasing them with offers of directorships. Bourses like the Bombay Stock Exchange (BSE), the Multi-Commodity Exchange and the newer exchanges set up as open public-private partnerships are working hard to position themselves as quasi-government organisations. Why is this so important? Mainly because the finance ministry and the capital market regulator accord special treatment to the National Stock Exchange (NSE), which positions itself as a sort of sarkari exchange. Finance ministry officials spend time at the NSE on deputation postings which are a stepping stone to jobs with the capital market regulator. Often, the NSE is the only exchange that is invited to be part of international delegations with the finance ministry and SEBI (Securities and Exchange Board of India). This enhances the NSE’s clout. Also, given that it was originally promoted by a set of public-sector entities, it has been headed by chairmen of the Life Insurance Corporation or IDBI. The NSE no longer has such a significant public-sector shareholding, but the recent appointment of Dr Vijay Kelkar (former finance secretary and chairman of the 13th Finance Commission) as its non-executive chairman helps retain the image of a quasi-government entity.

In fact, NSE is a hugely profitable (operating margin of over 50%) but secretive organisation that pays the highest salaries in corporate India to its top management which, in turn, works hard to avoid disclosures under the Right to Information Act.
Naturally, every other exchange strives for a similar status. So, MCX is headed by a former finance secretary, Ashok Jha, and has several former bureaucrats and regulators on its board. The BSE, which used to be happy with private-sector heavyweights, is also roping in top babus. It recently added two ex-IAS officers as public directors on its board and already has another, Vivek Kulkarni, as the shareholders’ director. The newest entrant, United Stock Exchange, has also announced the appointment of Arun Ramanathan (former finance secretary) and Dipak Chatterjee (former commerce secretary) as independent directors. Clearly, the benefits of being part of the civil service are lifelong.

Judiciary Dislikes It
This happy scenario of IAS officers planting themselves into every conceivable aspect of public and private administration is only likely to face a block when it comes to exercising quasi-judicial functions. In a landmark judgement in May 2010, a five-judge constitutional bench of the Supreme Court of India said that the government would have to amend the laws before instituting the National Company Law Tribunal and the Appellate Tribunal. Equally importantly, the Bench (comprising Chief Justice KG Balakrishnan and Justices RV Raveendran, DK Jain, P Sathasivam and JM Panchal) also slammed the practice of filling such tribunals with bureaucrats. Justice Raveendran, who wrote the judgment for the Bench, said that bureaucrats could, at best, be technical members of tribunals and all appointments to the post of presiding officers had to be made in consultation with a committee headed by the Chief Justice of India or his nominee and comprising a judge of the Supreme Court or the High Court, as well as secretaries in the ministries of company affairs and law & justice. The Supreme Court also said that the technical members should not exceed judicial members and the tenure of the members should be increased from three years to five or seven years. The judgement says that “a term of three years with a retirement age of 65 is perceived as tailor-made for persons who have retired or shortly to retire and encourages these tribunals to be treated as post-retirement havens.” Elsewhere, the learned judges expressed worry at the shrinking of space occupied by the judiciary and the dilution of qualifications required to discharge judicial functions. The judgement says, “The speed with which the qualification for appointment as Members (of these tribunals) is being diluted is, to say the least, a matter of great concern for the independence of the judiciary.” This is just the beginning. We learn that the judiciary is extremely concerned about persons with no legal background taking on quasi-judicial functions, not only on tribunals, but even on independent regulatory bodies. One example was the manner in which the SEBI board, in a meeting chaired by Mohandas Pai (a director of Infosys), reversed an order of the Mohan Gopal-V Leeladhar Bench with regard to the National Securities Depository Limited (NSDL). Concerned members of the judiciary worry that, unless checked, this trend will vitiate the justice delivery mechanism.{break}

Selective Recall
Even regular market-watchers were rather startled with the SEBI press release announcing that Motilal Oswal Securities had filed consent terms in what was dubbed the IPO (initial public offering) or multiple application scam of 2003-05. The firm settled the case on 6th May by paying Rs5 lakh without acknowledging guilt. Earlier, SEBI officials had wanted its operations as a depository participant to be suspended for six months for failure to exercise due diligence in enforcing KYC (know your customer) norms.

The Motilal Oswal case is rather curious, because SEBI was quick to permit it to set up a mutual fund, where it would handle the savings of several thousand retail investors, even when this case was pending.  Of course, in September 2009, Motilal Oswal Asset Management had smartly appointed Dr PJ Nayak, whose reputation for personal integrity and as a banker is sky high, as its chairman in the run-up to getting SEBI clearance in January this year. We learn that Dr Nayak has since resigned, after taking over executive responsibility as country-head and CEO of Morgan Stanley in India in March 2010. Motilal Oswal’s first offering, an exchange-traded fund based on a proprietary index, is still to be launched.

Radia’s Haldia Deal
The Income-Tax Department keeps the transcripts of the Niira Radia tapes a closely guarded secret. They are marked ‘Top Secret’ and ‘Strictly Confidential’, obviously because the PR firm, which has the accounts of Reliance Industries Limited as well as the Tata group, is bound to have enormous clout. Yet, the inevitable driblets are slowing seeping into the public domain, to reveal the exact nature of ‘communication’ and ‘PR’ skills that Ms Radia brought to these companies. A part of these transcripts available with us indicates that Mukesh Ambani apparently wants to take over Haldia Petrochem with Ms Radia helping the deal, but “one Purnendu may create a problem and will have to be handled by Mukesh.” The authenticity of the transcripts is clear from the fact that the person on the job doesn’t even know that the ‘one Purnendu’ is none other than Dr Purnendu Chatterjee, deputy chairman of Haldia Petrochemicals. Ms Radia, meanwhile, seems to be working with the Haldia chairman to re-open the issue with CPM leaders Nirupam Sen and Prakash Karat.

User

COMMENTS

SAMAR MAHAPATRA

7 years ago

Excellent exposee.In the true tradition of Sucheta Dalal.

Drunk Policymaking

The hypocrisy on the alcohol policy is getting worse as Maharashtra claims to raise the...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation
Foggy Picture

Don’t assume that fundamentals would remain rosy

I had written four weeks ago that after the...

Premium Content
Monthly Digital Access

Subscribe

Already A Subscriber?
Login
Yearly Digital+Print Access

Subscribe

Moneylife Magazine Subscriber or MSSN member?
Login

Yearly Subscriber Login

Enter the mail id that you want to use & click on Go. We will send you a link to your email for verficiation

We are listening!

Solve the equation and enter in the Captcha field.
  Loading...
Close

To continue


Please
Sign Up or Sign In
with

Email
Close

To continue


Please
Sign Up or Sign In
with

Email

BUY NOW

The Scam
24 Year Of The Scam: The Perennial Bestseller, reads like a Thriller!
Moneylife Magazine
Fiercely independent and pro-consumer information on personal finance
Stockletters in 3 Flavours
Outstanding research that beats mutual funds year after year
MAS: Complete Online Financial Advisory
(Includes Moneylife Magazine and Lion Stockletter)