Appalling Record as IL&FS Director Ought to Disqualify Bhargava as Maruti Suzuki Chairman

EXECUTIVE SUMMARY. R.C. Bhargava is the long-serving current chairman of Maruti Suzuki India, India’s largest automobile company. He was also an independent director of IL&FS, the failed infrastructure developer and non-bank finance company, from 1990 till 2018. At that point, the Indian government finally removed all the directors of IL&FS for gross mismanagement. Not only is it disgraceful for any director to have been ejected under such dubious circumstances, but it is also shameful for prominent listed companies to continue to retain such individuals on their board of directors.

In his nearly three-decade stint as an independent director at the misgoverned IL&FS, Bhargava till FY2018 served as the chairman of its all-important audit committee, and as a member of the equally important risk management committee for at least 7 years. In a report dated March 22, 2019, the regulator, the Reserve Bank of India (RBI), passed scathing remarks on the fudged accounts and lack of oversight by the independent directors at the company. It said,

“[IL&FS] had not declared bad loans in the four years to March 31, 2018. Wide divergences were observed between reported and assessed position of asset classification and provisions…Unscrupulous, negligent and dormant management decisions, involving huge sums of public money indicate that the (former) board was completely incompetent.”

The RBI report also highlighted that the NPAs in IL&FS were an astounding 70% of its total loans and that there was no risk management in vogue. This writer was also the first analyst to point out that the Risk Management Committee under the earlier board had not met on a single occasion in the last 3 years, and this aspect was also mentioned later in the RBI report.

The RBI’s strictures indict the professional conduct of Bhargava, but even these searing comments did not deter either Suzuki Motor Corp., the parent company, or the prominent minority institutional shareholders of Maruti Suzuki from retaining Bhargava. Ironically, he also serves as the chairman of Maruti Suzuki’s risk management committee. That the 85-year old Bhargava continues to chair the firm, and serve as the public face of the automobile major, speaks volumes about the state of corporate governance in corporate India.