What’s good for the goose!!
The government, as in all their recent predecessors, is cottoning onto the same gullible mistakes – especially where private banks are concerned.
The Business Times learns that the Ministry of Finance (MoF) has written to certain directors representing state-held shareholdings in private commercial banks asking them to resign and make way for the incumbent government nominees. The argument is that the state representations on commercial banks’ boards should represent people that are supporting the government in power. In this instance this may ‘look’ right, but is it?
While most directors have resigned to avoid the ‘unpleasantness’, some others are standing their ground. They say that there is a process to get directors to relinquish the positions and that is to out-vote them at an Annual General Meeting (AGM) or an Extra Ordinary General Meeting (EGM).
It won’t be too easy for them, as unofficially they are being bullied and harassed with many letters into submission saying the state institutions will ‘collectively’ use their voting rights to kick them out. The word collectively should stand out at this point because that means acting in collusion/ concert. Acting in concert is prohibited by the banking law.
But it still happens. Or there’s a ‘threat’ of it happening in this case.
Former Finance Minister, Ravi Karunanayake in the last government did this. Those before him did it. It’s been going on for the past 15 years by the state using the Employees Provident Fund (EPF) and Sri Lanka Insurance Corporation (SLIC) shareholdings.
The EPF has 9.63 per cent of Commercial, 8.01 per cent in DFCC and 9.76 per cent in HNB. SLIC has 14.63 in HNB, 8.71 per cent in DFCC and 5.83 of Commercial as at last year.
It must be mentioned that in the last government three of the Commercial Bank directors appointed by the 2005 government continued and completed their full nine-year term.
After Dr. Indrajit Coomaraswamy took over as Governor, the Central Bank (CB) in 20I7 stopped this practice.
Those pro – government indignantly question why shouldn’t the government appoint its people if other shareholders can do so.
A) The representations of privately held shareholding don’t ‘rotate’ every half a decade like the governments do.
B) Private banks depend on ratings, professionalism and soundness to attract foreign capital, not on the strength of the government.
C) Private shareholder voting rights mustn’t be restricted to 15 per cent if state exercises beyond this limit.
D) Its’ against the law.
E) Its’ against ethics and common decency.
F) Two wrongs don’t make a right.
Government shareholding like private shareholders must be restricted to 15 per cent when exercising voting rights to prevent politicisation of private banks.
The shareholder funds in a bank are less than 10 per cent of the total capital employed in a bank. More than 85 per cent is depositors’ and lenders’ money. Shouldn’t the representations be allowed in their favour?
Also, EPF which is workers’ money and SLIC which is the life fund of the people isn’t state owned but managed by them. The question arises whether it’s ethical for them to vote with the government. It’s become a chicken and egg situation but there ‘was’ hope that the current government which promoted much meritocracy will put a spoke in this vicious wheel.
The MoF should brush up on company law because it seems they are unaware.
In these unprecedented times with the added issues of the pandemic, private banks need financial soundness to retain their local and international ratings.