Public Company Mischief and Madness

Barbados Free Press reader “M” alerted us to this article from the Trinidad & Tobago Express – calling attention to the way corporations turn into unaccountable “old boys’ clubs”.

Once again, without transparency and accountability legislation, small investors will continue to be raped without recourse to law in both Barbados and Trinidad and Tobago.

From the Trinidad & Tobago Express, December 10, 2006…

Public company madness

Emile Elias

Sunday, December 10th 2006

We quite rightly demand transparency and accountability in the way the Government manages public funds. However, public companies set a bad example by not being inclined to disclose key information to their shareholders and continue to have boards of directors operating as though they are a small men’s club, ensuring their self-interest by careful induction of new “club members” so that no one rocks the boat, all this in spite of the new Companies Act.

They forget that they are there to serve the interests of shareholders.

There is rampant conflict of interest, interlocking directorships and attorneys sitting as directors while receiving millions in fees for legal work. Whatever happened to the legal adage-“A lawyer who advises himself has a fool for a client”? So, we shareholders are being treated as fools?

Surely, if an attorney sits on a public company’s board, this should disqualify him from doing paid legal work for that company, as it would be a clear case of conflict of interest.

Then there are rights issues with broken promises and no repercussions. Non-disclosure of material events and outright misinformation to shareholders, as was the case earlier this year with TCL when they had their quality control problems in Jamaica.

In the US if any director or senior executive manager buys or sells shares in their company, there is a legal requirement to file this information with the SEC and it is then publicly available. In addition, the total compensation package of all directors and senior management, including the much-abused stock options benefit, and other types of income and benefits (first class tickets to London annually?), must also be fully disclosed.

Not so in T&T. In fact, there is not even a legal requirement to publish quarterly results.

Six years ago, TCL had a rights issue marketed with optimistic profit projections which have never materialised, even to this day. Earlier this year, when news broke of quality problems in Jamaica, and rumours of huge losses were circulating, we were told categorically that TCL was fully insured for those losses and the financial exposure was minimal. The truth was finally admitted in their recent nine-month results – $25 million lost, and NO insurance. One of the consequences of this was the cancellation of its interim dividend. Unbelievably this mendacity went unpunished.

It is now widely known that there are two Canadian banks currently trying to buy or merge with RBTT. I am told that the indicative share prices being offered are both in excess of $40 per share. This is a material event if there ever was one. Yet, this has not been disclosed to the current shareholders or the investing public by the directors of RBTT.

Instead, under pressure from the SEC, they published a “dotish” and arrogant statement drafted, I am told, by one of its directors for a fee (?), saying that RBTT’s policy is “not to comment on any potential corporate transaction unless and until a decision has been made by its board”. What in blazes is going on?

Someone is trying to buy the bank for almost double the recent share price of $24 and the OWNERS will not even find out about this until this men’s club “decides”!

RBTT has been trying to find a partner for more than a year. An effort to merge with The Royal Bank of Canada allegedly failed after a due diligence was done, sparking some unhealthy rumours about poor “risk management” standards that gave credence to Tony Deyal’s exposé about alleged losses of TT$600 million on a largely unsecured loan in Belize. Silence from the RBTT directors and the share price declined.

Further, it is not for the directors to “decide”-it is the shareholders’ prerogative together with the Central Bank and the Government, as to whether RBTT should be sold or merged. My point is that all this must be put on the table openly. The SEC in T&T must be given wide-ranging regulatory authority with teeth.

Locally, consultants Stikeman Elliott have been commissioned by the SEC and their recommendations include compulsory quarterly reports and detailed annual management reports. We would all like to see this latter from TCL and RBTT management.

The RBTT Guyana Quarry loan of US$16 million would make an excellent case study for an MBA programme on how NOT to get conned by a borrower, while paying senior staff huge bonuses for booking this bad loan. More than US$12 million lost there.

Full details of compensation packages must be also filed with the SEC and available to the public. Ditto with buying and selling shares in a company.

Not surprisingly, these proposals are being resisted by some public company boards and auditors, even though International Accounting Standards require full disclosure of all compensation paid to such executives and directors.

Please, let the shareholders know if it is true that the chief executives of some public companies earn more than five times what the Prime Minister gets.

I call on the SEC, the Central Bank Governor and the Minister of Finance to publicly commit themselves to implementing the Stikeman Elliot proposals without any further delay.

Corporate governance must by law be made more transparent.

6 Comments

Filed under Barbados, Crime & Law, Offshore Investments, Politics & Corruption

6 responses to “Public Company Mischief and Madness

  1. Tudor

    Different faces, same ting. “We know we like it so”

  2. reality check

    when you say five times what the PM gets

    are you referring to his declared government income or income from all sources?

    birds of a feather ( Antiguan birds )

  3. Pingback: Global Voices Online » Blog Archive » Barbados: Corporate Governance

  4. Has anybody identified similar conflict of interest between directorships and attorneys here in Barbados? Are there directors of publically quoted companies who handle that company’s conveyancing?

    RBTT, TCL and BWIA are traded on our stock exchange. Are our investors being kept aware of what is going on in Trinidad?

    Would anyone here dare speak out like Emile Elias? In a small society one fears recriminations and reprisals.

    I have heard it said that our nation was really run by an “old boys’ club” made up of attorneys of both sexes, many of whom become elected politicians. Is this no longer true? If have also heard murmurs of the influence of the masonic lodge, or is it taboo to talk of such things

    What price transparency?

  5. Bystander says he has heard it said that our nation was really run by an “old boys’ club” of attorneys.

    Does “was” imply it no longer is? Certainly a great many of our politicians are qualified lawyers. But I have never heard that the “lodge” might be involved. A North Barbados mafia- yes, led by the PM.

    Certainly Emile Elias makes the point forcefully that there must be legal restrictions on conflict of interest in directorships, and the interests of shareholders must be guarded. Many Trinidad companies have interests here and what he reveals applies to Barbadians as much as Trinis.

    Corporate “Transparency” must not be assumed; it must be demanded and enforced.

  6. Rumplestilskin

    Two things. Firstly, interlocking directorships in Barbados have previously been highlighted as far back as the Mutual’ issue by Professor Hilary Beckles.

    One can understand that shareholders want and need qualified and reliable persons to conduct the business of the company.

    However, when such appointments are themselves not at arms length and when, as the above article states, the directors themselves may benefit from company contracts such as legal work, the arms-length nature of decisions made by the directors come into question, at least in appearance if not in substance.

    Furthermore, internationally there are rules in place governing the appointment and rotation of auditors.In many cases, due to conflicts of interests auditors have resigned to allow another auditor to be appointed. The significance of this is that auditors, the independent eyes who are aoppointed to provide fair assessment of financial statements and controls, themselves must be clearly independent and seen to be so.

    Emoluments of directors should indeed be disclosed, together with any contracts by which they may have benefical interest.

    The level of emoluments should not be surprising. Why should a business leader not earn more than the PM, as the article seems to infer?

    I agree, disclosure is necessary, but in so doing citizens must appreciate the abilities, experience and business contacts of the person/ persons in the positions.

    In terms of freemasonry that has been brought up above, such is an interesting question. There are known freemasons in private and public life and one questions whether such linkages affects the delivery of decisions by either parties?

    The answer given is usually that it is a private organisation and not for discussion, however when one is in certain positions is that acceptable?

    When one is in certain positions one must be seen to be acting in the public interest and in the above case, in the interest of shareholders.

    On the public masonic sites on can see in pictures such persons as former COP, business leaders and indeed names that have been ‘bandied about’ in relation to specific issues.

    Such makes the cause for concern even greater.

    I have even been told recently that certain persons believe that they can get away with certain things ‘because of their position in the lodge’.

    By its very nature i.e. secrecy, public officials should declare their interest and positions in any such organisations, in order to ensure that their
    decisions are independent. Such declaration also serves to protect them, from ‘personal’ recourse.