Harry loses round one
shareholders, bank employees unions and others opposing attempts
by tycoon Harry Jayawardena to expand his business empire and extend
his control of the banking sector claimed victory at last week’s
extraordinary general meeting held to oust Mahendra Amarasuriya
as Commercial Bank chairman.
this is only the first round of the battle and it is unlikely Jayawardena
would give up so easily, especially since the Central Bank has not
yet ruled that he has violated the banking regulations.
meeting, where emotions ran high, ended up being postponed without
a decision on Amarasuriya’s future. Minority shareholders
and bank employees were jubilant that they had managed to postpone
the meeting by filibustering and raising procedural objections.
EGM turned noisy when the management and majority shareholders tried
to go ahead with it despite the objections of minority shareholders
who insisted that it was illegal as adequate notice had not been
given about the change of venue. They also objected to the appointment
of the pro-tem chairman by the bank’s board of directors and
maintained that he must be appointed by shareholders.
turn of events bore all the hallmarks of a fast-paced drama –
with court decisions being given just hours before the crucial EGM
or even while it was being held, and unions rushing from one court
to another, breathlessly chasing a favourable ruling, and finally,
the riotous end to the meeting.
meeting broke up as news reached it of the Appeal Court ruling restricting
Harry Jayawardena’s voting strength in Commercial Bank to
10 percent. Despite his control of a much bigger stake in the most
profitable bank in the country, the Appeal Court order said these
parties could not use their voting rights in excess of 10 percent.
There are some minority shareholders who maintain that the EGM should
have gone ahead after the Appeal Court ruling in which case the
motion to remove Amarasuriya would likely have been defeated.
some extent, the battle for control of Commercial Bank has the appearance
of pitting the old established business elite whom Amarasuriya represents,
against the new entrepreneurial group personified by Jayawardena.
By a strange turn of events, Jayawardena’s emergence as a
powerful businessman, most recently propelled partly by funds generated
by the Distilleries cash cow (given the penchant for drinking alcohol
among Sri Lankans, one of the highest per capita consumers of hard
liquor in the world), has the appearance of repeating the rise of
the mercantilist elite who gained dominance of the island’s
business sector in the latter half of British rule largely through
money generated by arrack renting before using that wealth to diversify
into other areas and gain prominence in the professions.
Jayawardena may have been thwarted this time in his bid to extend
his control over a greater part of the banking sector but most probably
he would continue efforts to keep even indirect control.
There are arguments for and against consolidation in the banking
sector as well as consolidation in the manner that Harry Jayawardena
appears to be seeking. His bid for dominance has raised concerns
about fair play and competition.
are concerns that giving commercial interests control over banks
could create problems for depositors and borrowers alike. This would
give such business interests access to classified information on
market rivals through their control of banks. Such leaks of sensitive
information about competitors’ financials and borrowings could
put them at a disadvantage.
the furore created by the takeover attempt the Central Bank is refusing
to get stampeded into a decision – leading to concerns that
it is being too cautious or even that it tacitly approves Jayawardena’s
attempt to control three banks.