Courage, guts and gumption
Urgently wanted: An organisation to groom budding company directors with good values, ethics, governance, accountability and also common sense. Qualification for entry? Courage, guts and gumption!
The recent brouhaha over the appointment of directors and also the conduct of directors in some listed companies in the Colombo Stock Exchange and non-listed companies raises questions as to whether Sri Lanka has the directors with the right credentials to take the corporate sector forward.
The Sri Lanka Institute of Directors (SLID), the Securities and Exchange Commission (SEC), the Institute of Chartered Accountants (CA Sri Lanka), the Colombo Stock Exchange and the chambers are all striving for one goal in the corporate culture – good governance and accountability.
In fact, SEC Chairman Nalaka Godahewa – speaking at a joint launch by CA Sri Lanka and the SEC on the revised Code of Best Practice on Corporate Governance in Colombo this week, said corporate governance plays a critical role not only in ensuring corporate success but also promoting Sri Lanka’s economic growth. “Upholding the virtues of corporate governance indicates not only accountability to shareholders, greater transparency and fairness but it promotes the role of companies in the creation of wealth of the nation,” Dr. Godahewa was quoted as saying.
There have been many discussions on the role of a director in boardrooms and outside but are these institutions practicing what they preach? Directors or senior officials should not only be honest and clean but also seen to be honest and clean, and furthermore incorruptible.
In Sri Lanka there are three sets of directors: Those who say – to hell with ethics; that commissions and being a ‘wee bit corrupt’ is part of the game. You can’t do business without these, is what this group claim. Then there are some directors, mostly seniors and in the 40-50s age group, who are not corrupt, see it happening within their space, are appalled but reluctant to take a stand. They will get involved in a scuffle – meaning if there is a chorus of opinion against corruption- and then join the bandwagon; unlikely of course to throw the first stone, and be unpopular! The final category, one could say, is the ‘last of the Mohicans’, a dying breed of professionals who will stand up for what is right and unafraid to say it irrespective of the consequences which are many in today’s world.At a discussion some time ago on governance, senior directors were shocked by the revelations of one particular panelist who was blunt in his ‘dubious’ share market dealings and believed that there should be limited regulation. None of those in the audience raised any objection and defended the need for good corporate governance; instead watching silently in amazement. However outside the forum, they joined in criticizing this particular panelist. Many directors are honest but are reluctant to raise issues fearing their companies would be marginalized or victimized in the well-known world of ‘I-scratch-my-back-youscratch-yours’ culture of business today. Losing a contract is bad for business.
What then are the lessons that senior and experienced directors are teaching today’s young leaders in business. It is that doing a ‘small (tiny)’ crooked deal is right?
There is no problem with the criteria laid down in the SEC/CSE rulebook for the appointment of directors and/or trustees. The problem is in the implementation.
The same applies to the ‘fit and proper’ rules of the Central Bank pertaining to the appointment of directors and CEOs in banks and other financial institutions where permission has to be obtained from the regulator.
Questions have been raised in the past about some of the directors appointed to these institutions. Regulators rightly take the position that an individual is guilty only on conviction (in a criminal or any other offence) and unless convicted, such an individual is presumed innocence. However these structures must go beyond just rules and appointments should also be based on moral character and honesty (standard guidelines for recruitment to any position, even than of a junior office aide or assistant) and should be compulsory criteria.
Persons accused of fraud, murder or deceit, are among directors appointed in listed companies and other institutions and such appointments send a wrong signal to society and foreign investors, particularly when Sri Lanka is being projected as a country to invest with sound fundamentals which includes good corporate governance.
Going by the recent appointment of controversial directors to some companies one wonders whether espousing corporate governance through flashy annual reports is just rhetoric or whether they mean it and put it into practice.