SLID poised to take off to greater heights

Enron and WorldCom scandal, crash of Lehman Brothers and closer home, the collapse of Pramuka Bank and Golden Key Credit Card Company Ltd., to name a few, brings to mind the importance of boardroom ethics and the need for a director to be alive to what is happening inside his/her own company without being solely dependent on others for such information.

Sri Lanka’s Companies’ Act of 2007 also holds directors’ accountable. It even empowers the law to seize a director’s own private assets for the recovery of losses suffered by a company.

Therefore, subscribing to boardroom ethics is not only crucial for the survival of a company or a director’s character, but is also important to safeguard his/her s own personal assets, to prevent a director from being pauperised. The law has no mercy on sleeping directors. It requires all to be ‘hands on.” This is no trifle matter.

However, the SLID Board Leadership Director Certification Programme, also known as the Board Leadership Training Programme (BLT) addresses this critical need. 

Sri Lanka Institute of Directors (SLID) Chairman Preethi Jayawardena told ‘The Director’ that BLT has a specific focus on grooming young directors and associate directors. “It’s even good for so called mature directors to prevent them from getting rusty and to fine tune them,” he said. 

BLT is mainly about corporate governance in practice and in action and is not limited to theory only. BLT makes a complete director. It’s also a training program specifically designed to enhance the leadership skills of Board Members.

 BLT is based on material developed by the International Finance Corporation (IFC) Global Corporate Governance Forum customised and updated to suit Sri Lanka and accredited by the Securities and Exchange Commission of Sri Lanka. The program is delivered by the SLID faculty of trainers who have the knowledge base, experience and skills set to lead director education programmes. Included in the SLID faculty are certified IFC Corporate Governance Board Leadership trainers.

“SLID is looking at submitting a proposal to make this certification program mandatory for new directors in public quoted companies,” Jayawardena said.

BLT, with a focus on corporate governance runs over two full days over four months and comprises four parts and 16 modules covering topics such as corporate governance, the business case for corporate governance, disclosure and transparency, shareowners and stakeholders, board’s role, directors duties and liabilities, the effective board: composition and structure, board practices, board procedures, governance of strategy, evaluating strategy delivery and executive directors’ performance, the governance of risk, corporate responsibility, financial oversight, reporting, corporate finance, and the control environment.

The program is delivered by a faculty comprising renowned professionals and corporate personalities such as Dr. Harsha Cabral (PC), Dilani Alagaratnam, Aroshi Nanayakkara, Dilshan Rodrigo, Manil Jayasinghe and Suren Rajakarier.  

Ordinary members of SLID who complete the SLID Leadership Training programme will be qualified to become graduate members of SLID and are eligible to use the acronym ‘GSLID’ after their name. GSLID members are included in a database and their names are shared with companies looking for independent directors.

“We must have such training programs for upcoming directors,” said Jayawardena. This training program is continuously renewed and upgraded, he said. It is on the job, practical training to the directors and not just theory alone, the SLID Chairman said.

It is a must for good boardroom practice. SLID together with IFC conducted an exclusive Corporate Governance Board Leadership Training of Trainers workshop last year for SLID’s faculty which built on their capacities, to create an interactive environment for the BLT program.

SLID also has a Power Evening series of knowledge sharing sessions which are held regularly as panel discussions on topics of interest for directors with globally renowned international and local presenters. The last couple of events were on the topics of what a director should know about cyber security, women on Boards, ‘the other duty of corporate governance’ and family business on taking over the mantle. There are focus groups such as the Audit Committee Forum and the Independent Directors’ forum which is in the process of being set up.

Jayawardena also has a passion for the development of the country’s small and medium enterprises (SMEs) sector, the backbone of the island’s economy.

An accountant by profession with international experience, and currently serving in several Boards of blue chip companies, he emphasised the importance of availing cheap credit to SMEs, the country’s biggest employer.

But the biggest handicap is that Sri Lanka has no development banks to provide cheap credit to the SME sector, Jayawardena told ‘The Director’.

The banking sector is operated by commercial banks. Therefore, lending to the SMEs in the absence of development banks is considered as being high risk by the island’s banking sector, he said. As a result, exorbitant interest rates are charged by commercial banks when lending to the SME sector.

It’s therefore imperative that the Government should step in and facilitate the SME sector, by making available to this critical cog in the island’s economy, cheap credit, the SLID Chairman said.

Nonetheless, to alleviate the burden of the SME sector somewhat, SLID has embarked on a program of educating the drivers in the SME sector, namely its owners, directors and operators, on financial literacy.

Being able to produce a professional set of accounts to banks may help to lessen the burden borne by SME operators, by banks weaning away from charging high lending rates to this key sector of the economy because of orderly and professional accounting standards adopted and presented by this important sector of the economy. 

“We recently conducted such education programmes in the East of the country previously neglected due to the country’s 26 year old internecine war which ended only eight years ago,” he said. SLID has spread the message of corporate governance to the provinces, free of charge to the participants in Kandy, Ratnapura, Trincomalee, Hambantota, Matara, Gampaha, Batticaloa, Kilinochchi, Jaffna, Mannar, Vavuniya and Ampara. 

The programme is conducted in the vernaculars, interspersed with English. Jayawardena’s aim is to reduce the inequality vis-à-vis the benign way that banks look at a big corporate as a borrower as opposed to an SME borrower.

SLID which has over 700 members and with associate members, its membership extends to 800.

Membership is also offered to leaders in the public sector but they must realise that there is nothing like a free lunch, the SLID Chairman said. 

He said that the ‘institute of directors’ is a worldwide program encompassing Sri Lanka’s giant neighbour India and embraces other countries in the region such as Pakistan, Singapore, Malaysia, Thailand, Indonesia and Australia. SLID plans to latch itself to this international network, to gain more insights as to how directors could add more value to their organisations and to the country at large.

With Jayawardena at the helm, SLID also has on its radar screen to improve the efficacy of family owned businesses. The SLID Chairman said that there have not been any studies done in Sri Lanka, but he believes that a majority of the companies in Sri Lanka are family businesses and globally studies have shown that more than 66% of businesses are family owned, and estimated to create about 70% of the annual global GDP. Nonetheless, most of those family run businesses don’t go beyond the third generation, he said. In business literature there is a 30:13:3 rule, which states that around 30% of family businesses survive to the second generation, 13% to the third generation and only 3% beyond the third generation.

Most often there is a difference between ownership and management in these family businesses and the need is corporate governance where everyone is treated equally so that there is value. 

A family member should not have special privileges over other members of the staff, said Jayawardena. For instance, he/she should not be given the advantage to come and go as he/she pleases, he said. If work starts at 8:30 a.m., that family member should set an example by coming to work on time, not later, he said. Then only will that family owned company grow.

Such family owned companies should also have independent remuneration committees, audit committees, credit committees, risk assessment committees and so on. Corporate governance should not be a byword. It should be practised. As the company grows, outside talent should be invited and be allowed to foster. Then only will family owned companies become sustainable and their future assured, he said.

SLID’s other Board members too comprise some well known figures in the country’s corporate sector. They are: Senior Vice Chairman Rasakantha Rasiah, Vice Chairman Faizal Salieh, Immediate Past Chairman Shiromal Cooray and Council: Dilani Alagaratnam, Aroshi Nanayakkara, Prakash Schaffter, Dinesh Weerakkody, Vish Govindasamy, Dilshan Rodrigo and Kasturi Wilson.