The nation’s financial watchdog SEBI is in deep trouble. Employees have accused the regulator of a toxic work environment, while the chairperson, Madhabi Puri Buch, has been subject to scrutiny for potential conflicts of interest and her handling of high-profile investigations. These allegations which began with American short-seller Hindenburg making some serious allegations against Puri have cast a shadow over the regulator and how it plays the hard cop.
The attacks are coming from various sources: employees, industry experts, and political parties, particularly Congress. Employees have come forward with accounts of a toxic work environment, including public humiliation, unrealistic expectations, and micromanagement. Complaints to the finance ministry in fact detail verbal abuse, excessive workloads, tight deadlines, and unreasonable performance targets.
SEBI, in a statement, has vehemently denied the allegations, claiming that the complaints are motivated by a desire for increased benefits and are influenced by external elements. The regulator has highlighted its efforts to improve the work environment, including initiatives such as quantified KRAs, monthly targets, accountability measures, and technology adoption.
SEBI’s response to toxic culture allegations
The controversy stems not from systemic cultural issues, but from a strategic move by employees seeking increased benefits, argues the regulator. “The statement suggests that a group of employees consciously designed a strategy to change the narrative to frame the issue as relating to the work environment, with an objective to have bargaining power to seek more benefits,” it says.
The claims of unprofessional work culture in the letter dated August 06, 2024, are “misplaced and seem to stem from instances such as under-pitching of processing capability of officers by as low as 1/4th of actual capacity, misreporting of the status of achievement of KRAs, shuttling of files between departments over a long period to avoid taking decisions,” adds the statement.
The regulator in fact claims to have implemented several initiatives over the past 2-3 years to improve accountability and performance. These include setting quantified Key Result Areas (KRAs) at the start of the year, establishing officer-level and team-level monthly targets for work completion, and implementing strict accountability for ageing and pendency of applications.
SEBI argues that these measures have led to significant improvements in responsiveness and timeliness of actions, benefiting the market ecosystem. “The Aging of pending matters across every single department has shown significant improvement and the market has felt the responsiveness and timeliness of SEBI’s actions as well.”
Defending its compensation structure, it asserts, “SEBI officers are already well paid, and for entry-level officers at Grade A, the cost to the company is approximately Rs. 34 Lakhs per annum, which compares extremely favourably even with the corporate sector.”
SEBI believes that junior officers have been misguided, potentially by external elements. Some employees have been led to believe they shouldn’t be held to high standards of performance and accountability, that they are underpaid despite a substantial compensation package, and that they should expect automatic promotions without meeting performance criteria, maintains SEBI.
External influences
SEBI’s statement aims at what it describes as “external elements” influencing junior officers. The regulator expresses concern that “junior officers have been receiving messages from external elements outside their group, effectively instigating them to …go to media, go to the Ministry, go to Board…, perhaps to serve their own purpose.”
In a pointed rebuttal, SEBI includes excerpts from employee associations condemning the leaking of internal information. One such excerpt from the SEBI Association (SEA) council states, “SEA firmly believes in dialogue and consultation with the management in line with the practice followed by SEBI in the last few years. SEA forcefully condemns the leaking of internal information to the media.”
The leadership crisis
This controversy unfolds against the backdrop of broader scrutiny facing the SEBI chief. The regulator is currently under the microscope for its handling of the Adani Group inquiry, with the parliamentary Public Accounts Committee (PAC) set to investigate allegations against SEBI Chairperson Madhabi Puri Buch. Some political parties have even called for Buch’s temporary removal to ensure an impartial investigation.
Zee Entertainment founder Subhash Chandra had accused the SEBI chairperson of corruption and bias and blamed her for the collapse of the Zee-Sony merger. Madhabi has also come under scrutiny for exercising stock options in her former employer, ICICI Bank, even after joining SEBI. This raises questions about potential conflicts of interest, considering SEBI is tasked with regulating publicly listed companies like ICICI Bank. The Congress party alleges Buch profited from ICICI Bank during her SEBI tenure. ICICI Bank clarifies Buch received no post-retirement benefits beyond accrued ESOPs.
The coming weeks promise to be critical for SEBI and its chief, as it balances internal challenges with its mandate to oversee India’s financial markets.