NDB isn’t private property, says Deputy Minister Eran
The Government this week firmly reiterated that the chairman of the National Development Bank (NDB) should be ‘independent of the bank’ in line with good governance after the former state development bank was stopped in its tracks by a plan to alter the articles of association and do away with the current ‘independent chairman’. Deputy Minister of Public Enterprise Development Eran Wickramaratne, incidentally a former CEO of the same bank, told the Business Times that the NDB is not someone’s private property to do as they please. “This was a government bank that was taken to the stock market. If it does not have the highest standards of governance and ends up in private capture, the people of this country will lose faith in privatisation and market mechanisms.”
Last week the NDB cancelled an Extra Ordinary General Meeting (EGM) called to change the articles to permit a non-independent chairman, after the bank’s fourth largest shareholder Dr. Sena Yaddehige obtained an interim order from court stopping the NDB move. Independent directors are those who either directly or indirectly do not hold more than 1 per cent of the issued shares of the bank. The deputy minister added that requiring the chairman of the board to be an independent director is a part of good governance which also makes good business. Current chairman N.G. (Tanky) Wickremaratne, a government nominee by the present regime, has decided to step down, bank sources said.
There was high drama last year after the government sought but failed to replace most government nominees as chairpersons of the former Rajapaksa administration at the Commercial Bank, HNB, Sampath and Seylan which have sizable stakes from state institutions. The NDB’s current articles require that its chairman is an “Independent Director’ whilst the Banking Act Direction No. 11 of 2007 on Corporate Governance for Licensed Commercial Banks in Sri Lanka does not impose such a restriction, which was NDB’s argument for such a resolution. The NDB board consists of six independent directors and four non-independent directors of which one is an executive director.
Dr. Yaddehige went to court to restrain NDB from acting contrary to its corporate governance obligations and its Articles of Association and tabling the resolution seeking to change the articles. His lawyers said that to date no application has been made by NDB bank to the Commercial High Court, to vacate the said restraining order. Their client has argued that removing the requirement of having an independent director as the bank’s chairman is not in the interest of NDB and would result in complying at a lower standard in respect of the corporate governance code of good governance.