James Moore: Essar Energy's power cut shows why we need to keep tabs on those at the top

'Tis the season to lose your chairman. So it seems anyway. Essar Energy's Ravi Ruia became the second to fall on his sword, albeit temporarily, in two days following the announcement of plans by Prudential chairman Harvey McGrath to step down.

But if the man at the head of the Pru's board had a monkey on his back having failed to secure the backing of a quarter of his shareholders at the last AGM, Mr Ruia has the biggest silverback in the jungle on his.

The Essar Energy chairman and founder stepped back from the company in the wake of India's Central Bureau of Investigation (CBI) filing a series of lurid-looking charges related to the wider Essar Group, a sprawling conglomerate with interests in everything from shipping to property to energy, and its holding in telecoms firm Loop.

The CBI alleges that Essar used Loop as a "front" to acquire a second mobile phone licence it had no right to because at the time they were sold by the Indian Government it had a 33 per cent stake in the larger Vodafone Essar.

The scandal surrounding the auction of mobile licences is estimated to have cost the Indian Government billions of dollars but Mr Ruia, and his brother, furiously deny the charges.

They've been here before and have so far swatted away any and all allegations of impropriety. Expect a long and bitter fight, which has the potential to be rather entertaining unless, that is, you happen to be one of Essar Energy's shareholders. Then it is no laughing matter.

Essar created a huge buzz when the company joined the London Stock Exchange earlier this year, in what was one of the biggest flotations for a long time.

Excitable commentators gushed about the potential of India's energy sector. With 45 per cent of the population, some 450 million people, having no access to power in a country growing at breakneck pace despite producing less than a quarter of China's power output, it looked like a penalty kick. Concerns about governance were pooh-poohed.

The English, though, really ought to know a thing or two about penalty kicks by now, given their football team's misadventures. Essar Energy has proved to be anything but. India's growth has slowed and so has Essar Energy's. The performance of the shares has resembled the sort of downhill slope the bankers who handled the float (they're from JPMorgan and Deutsche Bank) will doubtless be enjoying on their winter breaks right now.

At such a time you really need your chairman and your chief executive to be focused on steadying the ship and turning it around.

Which is exactly what is not going to be happening at Essar Energy. Which is exactly why the Financial Reporting Council calls for companies to appoint an chairman who satisfies its criteria for independence when he or she joins the board. And exactly why Pirc, for example, recommended that shareholders oppose the election of Mr Ruia.

There are people who accuse Britain's corporate governance lobby of being box tickers. They would argue that if a company does well, then it shouldn't matter how it is run. The Essar affair has the potential to show just how wrong headed that view is.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Customer Service Advisor

£15000 - £16000 per annum: Recruitment Genius: Customer Service Advisors are r...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45K: SThree: SThree were established in 1986....

Recruitment Genius: Compliance Manager

£40000 - £60000 per annum: Recruitment Genius: A Compliance Manager is require...

SThree: Talent Acquisition Consultant

£22500 - £27000 per annum + OTE £45K: SThree: Since our inception in 1986, STh...

Day In a Page

Seifeddine Rezgui: What motivated a shy student to kill 38 holidaymakers in Tunisia?

Making of a killer

What motivated a shy student to kill 38 holidaymakers in Tunisia?
UK Heatwave: Temperatures on the tube are going to exceed the legal limit for transporting cattle

Just when you thought your commute couldn't get any worse...

Heatwave will see temperatures on the Tube exceed legal limit for transporting cattle
Exclusive - The Real Stories of Migrant Britain: Swapping Bucharest for London

The Real Stories of Migrant Britain

Meet the man who swapped Romania for the UK in a bid to provide for his family, only to discover that the home he left behind wasn't quite what it seemed
Cheaper energy on the way, but it's not all sunshine and rainbows

Cheaper energy on the way, but it's not all sunshine and rainbows

Solar power will help bring down electricity prices over the next five years, according to a new report. But it’s cheap imports of ‘dirty power’ that will lower them the most
Katy Perry prevented from buying California convent for $14.5m after nuns sell to local businesswoman instead

No grace of God for Katy Perry as sisters act to stop her buying convent

Archdiocese sues nuns who turned down star’s $14.5m because they don’t approve of her
Ajmer: The ancient Indian metropolis chosen to be a 'smart city' where residents would just be happy to have power and running water

Residents just want water and power in a city chosen to be a ‘smart’ metropolis

The Indian Government has launched an ambitious plan to transform 100 of its crumbling cities
Michael Fassbender in 'Macbeth': The Scottish play on film, from Welles to Cheggers

Something wicked?

Films of Macbeth don’t always end well - just ask Orson Welles... and Keith Chegwin
10 best sun creams for body

10 best sun creams for body

Make sure you’re protected from head to toe in the heatwave
Wimbledon 2015: Nick Bollettieri - Milos Raonic has ability to get to the top but he must learn to handle pressure in big games

Nick Bollettieri's Wimbledon files

Milos Raonic has ability to get to the top but he must learn to handle pressure in big games
Women's World Cup 2015: How England's semi-final success could do wonders for both sexes

There is more than a shiny trophy to be won by England’s World Cup women

The success of the decidedly non-famous females wearing the Three Lions could do wonders for a ‘man’s game’ riddled with cynicism and greed
How to stop an asteroid hitting Earth: Would people co-operate to face down a global peril?

How to stop an asteroid hitting Earth

Would people cooperate to face a global peril?
Just one day to find €1.6bn: Greece edges nearer euro exit

One day to find €1.6bn

Greece is edging inexorably towards an exit from the euro
New 'Iron Man' augmented reality technology could help surgeons and firefighters, say scientists

'Iron Man' augmented reality technology could become reality

Holographic projections would provide extra information on objects in a person's visual field in real time
Sugary drinks 'are killing 184,000 adults around the world every year'

Sugary drinks are killing 184,000 adults around the world every year

The drinks that should be eliminated from people's diets
Pride of Place: Historians map out untold LGBT histories of locations throughout UK

Historians map out untold LGBT histories

Public are being asked to help improve the map