The right to information

The Companies Act is finally getting into the law books … hopefully by next month. It aims to provide more accountability from directors, governance and better management among other issues. But is there more that meets the eye?

One of the biggest problems as our story elsewhere in this section reveals is the lack of information to make people – particularly small shareholders -- aware of the contents of this Act.

There has been a plethora of seminars and public awareness events but mostly high priced ones and beyond the reach of most small investors. It’s generally targeted to the corporate sector and high networth individuals.

Minority shareholders complain of lack of information and confusion over issues like bonus, etc; corporate lawyers respond saying minority shareholders have woken up – as usual – too late when the bird has flown while the Securities and Exchange Commission (SEC) has taken cover saying it’s the responsibility of the Registrar of Companies.

But no one asks a most pertinent question – the right to information to the public. An important piece of legislation that has been in the making for many years needs to go through a process of public debate. To some extent it has but at what level? Have there been enough consultations with small and minority shareholders? Yes it was discussed in parliament and copies of the bills available but is there public access to these documents or does it get into the hands of the media only and a few others?

In the 1980s, Sri Lankan leaders spoke of a share-owning democracy in which most Sri Lankans would own shares thus creating wealth. The 1983 anti-Tamil riots put paid to that idea and other plans to turn Sri Lanka into the next Singapore.

In recent times however the Colombo Stock Exchange (CSE) and the SEC have been promoting the stockmarket and urging people of all walks of life including housewives to invest in shares. Regional stockmarket trading centres have been a move in this direction.

But these steps are not followed by adequate safeguards to man-on-the-street investors and the way the awareness campaigns on provisions of the Companies Act has been handled leaves much to be desired. The new Act has much to do with the stockmarket and regulators are duty bound to provide that awareness.

Anyone doing the rounds of the seminar circuit would tell you there has been enough and more information on the role of directors and accountability. But we ask once again, is that enough? The very Act which is meant to pave the way for more governance and transparency in managing companies is itself lacking transparency in making its contents available to the public. Ask any small shareholder and he would tell you that it has been very difficult to lay your hands on a copy of the Act. It is also taking many weeks for it to be gazetted due to delays in the Parliamentary Speaker putting his signature on it.

The Government Publications Bureau doesn’t have it and the institution that is responsible for ensuring safeguards in the behaviour of the stockmarket says it’s not their baby and pointed to the Registrar of Companies whose role is to register companies among other functions.

The bigger shareholders have always been at odds with minority shareholders who complain of lack of transparency and boorish and arrogant directors brushing aside questions at AGMs. On the other hand directors say these ‘troublesome’ shareholders are only interested in having a good meal after the AGM, take whatever handouts offered and ask ‘stupid questions’. Shareholders respond: “They don’t listen to us or ‘permit’ questions, so what can we do other than go for a tea party.”

Hopefully provisions under the new Act will compel directors to allow questions and clarifications from everyone, and provide the needed responses. There may be the odd shareholder or two who asks irrelevant questions. But that’s part of the democratic process and the rights of shareholders.

A lot of good work put into the drafting of the Companies Act may get clouded by the fact that there was no justice and fairplay in making the public at large aware of the contents of the new law.

Only a select few with ‘good’ connections were able to get copies or extracts of the Act while shareholders at the lower end of the spectrum had to go by bits and pieces of information appearing in the financial press.

Not good enough for a law that attempts to bring a new dimension into Sri Lanka’s corporate culture.