Corporate Governance (CG) in Sri Lanka is crap, a tax consultant told this reporter on Wednesday (September 25). The occasion was the launch of the fifth edition of CG, a joint effort of the Chartered Accountants of Sri Lanka and the Securities and Exchange Commission which took place in Colombo.
The first edition was launched in 1997, followed by the subsequent editions in 2002, 2004, 2008 and now this year’s edition.
This tax consultant’s comment comes in the backdrop of the Gold Key credit card company scandal of 2008, a then Ceylinco Group member which scandal not only affected the whole of Ceylinco Group per se, but even threatened the stability of the country’s financial sector.
Following the Golden Key scandal several other scandals overtook the corporate sector such as the alleged price manipulation of certain listed stocks where the miscreants have got away scot-free, while the most recent being the scandals involving Touchwood, a listed entity which has now gone into liquidation and Central Investments and Finance plc, a listed finance company supervised by both the SEC and Central Bank of Sri Lanka, which however is finding it difficult to meet its obligations to its depositors. On the issue of a murder suspect being appointed to the Board of Touchwood which is under liquidation, Dr. Harsha Cabral (PC) a panellist at this launch said that it’s up to the company’s shareholders to challenge this appointment in courts.
On the question raised by this reporter that it’s boards and not shareholders who appoint directors, Ronnie Peiris, a group director at John Keells Holdings plc, another panelist at this event said that while it’s the Board which proposes the names of directors to its Board, it’s the shareholders’ prerogative to either agree or to disagree of such appointments.
On making directors’ remunerations public, Cabral said that for the sake of transparency that that should be the way forward, though even under the new CG rules, it’s not necessary to show directors’ remunerations individually, but only collectively. Peiris said that there is a process that needs to be followed before deciding on directors’ pay cheques under the current practice, such as those emoluments being based on the recommendations made by the companies’ remuneration committees.
AsitaTalwatte, Managing Partner Ernst & Young Colombo who chaired the new CG compilation project, in his speech said that the publication has taken a leaf off the UK’s CG code, where it has been said that CG is to nurture entrepreneurship.SEC Chairman Dr. Nalaka Godahewa another speaker at this event emphasised Talwatte’s point that over-regulation may kill entrepreneurship.
Cabral said that previously banks in particular used to reward their retiring managing directors (MDs) with flashy cars and plush houses in Colombo, but under the new code, banks and companies need to first get shareholder approval before bestowing such gifts to their retiring MDs.
Another matter that cropped up at this launch was how “independent” an “independent director” may be, considering the fact that such “independent directors” are elected to the board by its shareholders. (Sunday Leader)