Age is a valuable asset in banking

By K.C Vignarajah

“Due process with checks and balances,” are imperative for good governance of PLCs and banks: not discrimination based on age, which is a very valuable asset especially in the most confidential/competitive banking sector.

“There shall be no discrimination based on age, gender, race, religion, ethnicity, etc.,” is a fundamental requirement of top companies and banks worldwide. Alas, in this age and time in our country, we seem to be having discrimination against very valuable experience, honesty, ability, impartiality and maturity which ensures balanced consideration of differing and contentious issues.

Those who appear to believe in corporate governance in PLCs and banks, as defined by those who seem not qualified to do so, or with vested/ conflicting interests. I have campaigned on this subject for more than seven years! Definitions of “directors”, independent advisor and the appointment of those, as well as auditors by the conflicting/controlling interests are a few among them.

The main corporate law of the land – the Companies Act 7 of 2007 – allows shareholders to decide on the capacity of a director who is above 70 years of age to be appointed/re-appointed to the board at the AGM. This provides the opportunity to take decisions in the best interest of the company, since the majority of the shareholders will decide on the suitability of a director to continue to function as director in the company’s board while taking cognisance of a person’s age, ability, integrity and experience.

The Central Bank of Sri Lanka (CBSL) undertakes inspections, investigations, supervision and regulation; indirect/informal nominees’ requests to the boards which direct the operations of the banks is in direct conflict with the before-mentioned responsibilities. The regulators should not appear to solicit directorship/s for their own retiring members and/or their nominees.

Warren Buffet, the world’s business legend, unparalleled fund manager/investment maestro, is a “hands on” top chairman and follows up on the performances of the very large conglomerate/companies he indirectly controls. Buffet has 50 years experience at the top and is only 81+ years young!

The Executive President of our country is 67+, has an enormously more onerous job and responsibilities on a 24/7 basis! Surely the Cabinet of Ministers, the top policy making body and even the Governor of CBSL will not expect the President to step down on his 70th birthday.

However, the directions of the Monetary Board (MB), of which the Governor of CBSL is the Chairman, issued under the Banking Act No 30 of 1988 as amended states that the age of a person who serves as a Director shall not exceed 70 years and the time period of service of a Director shall not exceed nine years.

Why was a special provision such as this introduced in Sri Lanka? ‘Sri Lanka, a land like no other’? The publicly listed banking industry was vibrant and independent, avoiding any political interference up to 2007.

Was it wrong popular perception, to infer CBSL/MB taking indirect/informal control of the boards of private sector banks, while having formal control as a regulator? In the context of alleged perceptions of apparent political alignment of governor/chairman of CBSL/MB, these directions make it worrisome for truly independent boards.

These could very well send off the really independent and well experienced directors of widely held PLC banks in order to fill the vacancies with their own people so that they could control vital bank boards.

Good corporate governance requires boards not to have directors with conflicts of interests in core areas of policy/operations in order to prevent influence and interference. There certainly could be interference, and political pressure on the banks because of such arrangements, thus preventing these vital institutions from operating effectively.

An overpowering, bloated, inefficient, political, corrupted state sector should not narrow and crowd out the independent, higher productive creative, competitive, socially conscious widely held Public Listed Companies (PLCs).

They, together with countrywide hardworking SMEs, (boosted by a good Budget 2012 with ‘clarity and consistency’!) are the backbone of a civilised democratic society, which would create the sustainability of a booming economy. Good PLCs with large public holding would ensure the distribution of economic growth benefits to the large mass of people.

In all humility, I am trying to perform the more important CSR (Citizens Social Responsibility) towards perfecting the popular CSR (Corporate Social Responsibility) for which good corporate governance is essential.

(The writer is a good governance activist and a shareholder of several companies.)