UNP MP and Consultant Economist Dr. Harsha de Silva yesterday issued the following statement following the bizarre developments concerning the Commercial Bank AGM.
The high handed way in which the Government is supposed to have acted to have Ranjit Fernando removed from Board of Commercial Bank has now spread around town.
Keeping aside unsubstantiated rumors which I don’t plan on bringing up, it is now very clear from a policy perspective how the Government, through EPF, is planning to take control of the entire commercial banking industry of Sri Lanka. Today’s action comes barely a week since the appointment of Dr. Ranee Jayamaha as Chairperson of Hatton National Bank.
At the outset, I must say I have known both Fernando and Jayamaha for close to 20 years and are personal friends and my position has nothing to do with them as individuals. But the whole process stinks and is the complete opposite to the good governance the Government is saying it is practicing. In fact these are perfect examples of bad governance and precursors to instability and civil commotion in time to come.
In fact I have brought up the issue of the total lack of governance in the EPF, managed by the Central Bank, trading in shares of commercial banks in the Colombo Stock Market where allegation are abound of market manipulation and insider trading by certain individuals. I have pointed out that such investments are unprofessional and unethical.
I have pointed out both inside Parliament and outside that such investments are in absolute violation of Section 220.127.116.11 of the EPF Investment Policy Statement and Standards of Professional Conduct that clearly states that the EPF cannot invest in stocks of the banking and financial sector due to conflicts of interests as the Monetary Board regulates both the EPF and banks and financial institutions. I have shown that the Standards of Professional Conduct also limit the investment in any (non bank blue chip) company to less than 5 percent of its issued share capital to “avoid undue control of the company by the Fund”.
However, all these fundamental good governance principles are being done away with in broad daylight! In fact it was just last week I spoke in Parliament during a very rare occurrence when the President was in the chamber. I brought to President Rajapaksa’s attention the most disturbing way things were being done (Hansard of 22 March 2011), but just a week later we see today not any improvement but further deterioration of governance.
Shareholder account of COMBank AGM
The Commercial Bank AGM began at 10.30 a.m. with confirmation of the relevant quorum being present and the annual report got adopted with not a single question raised. The dividend was also approved with only one shareholder arguing against the allocation of fractions of shares in respect of the in specie part of the dividend.
When the point came for directors re-election Ranjit Fernando made a short statement with the Chairman Mahendra Amarasuriya approving it. Fernando stated how he was invited and the role he played on the board and several committees, and acted always upholding good governance, best practices and being an independent voice. He had expressed similar views at external forums espousing the cause of good governance and being a voice of independence. But due to some issues in the recent week and some issues earlier he said he was withdrawing his nomination which had been unanimously recommended by the board. He stressed that his decision was driven by placing primarily the interests of the bank which has a great future with a committed team in management and a good board.
Commercial Bank Chairman Amarasuriya thereafter went on to make a presentation at length of the positive role played by Fernando on the board and the valuable contributions he made in governance, risk management, processes and the role in most of the committees. He said that the Central Bank had informed the Board that many of the major shareholders were against the re-election of Fernando and that in the face of that Fernando had decided to stand down and withdraw from the reelection.
Shareholder K. Vignarajah then made a statement talking of the strength of the board, capabilities of the individual members and CEO and also specially the role of Fernando in the Audit Committee and what he brings to the board from a bankers perspectives arising out of his vast experience at NDB, especially in fund raising, SMI and good governance and risk management and that the board should not let him go but appeal to the Central Bank. He said that independent directors must represent and be elected by the independent shareholders and major shareholders and the Central Bank should not interfere in the process and make directors puppets. He said that legal remedies should also be pursued against such interference.
At this stage Chairman Amarasuriya corrected Vignarajah that it was not the Central Bank but the shareholders who were electing directors. Vignarajah demanded that a vote be taken to find out who is for and who is against.
Chairman Amarasuriya then said the Major shareholders who had informed were EPF/ETF and SLIC (owning nearly 20%), and SBI Investment Holdings (9%) whilst DFCC- will not vote on reelection of directors as a policy. IFC proxy was with the CEO.
Thereafter Vignarajah wanted the Board to try and re-invite Fernando bearing in mind the interests of the independent shareholders in filling the vacancy.