Financial Times

There have been numerous inquiries due to some misleading articles by an anonymous "shareholder" appearing in the press including, unfortunately, The Sunday Times FT on April 23.

The good handling of the difficult meetings by Commercial Bank Chairman Mahendra Amarasuriya was praised by the vast majority of shareholders, and in good impartial articles appearing in The Sunday Times FT on April 2 and 9.

Quite obviously, myself as a shareholder and Mr. M. R. Shah as the employee shareholder have been targeted. We understand the context of unbridled anger of a few directors, their handlers and their henchmen, at being rebuffed by the eminent Appeal Court. They feebly murmured something and tried vainly to distract the audience during our contributions. An overwhelming majority supported our stand. The Chairman, taking note of the murmurs, sought clarifications and I pointed out, not only the relevance, but also the necessity.

My contribution were all relevant to the agenda to consider the Directors' Report in respect of the lack of compliance, the public interest, the elections of Directors, and of Auditors. The directors who were requested to resign were DFCC nominees and those who sat on the fence. They did not utter a single word in protest regarding the core issues I raised for they knew their correctness much better!

Let me cite the Code of Corporate Governance for Banks and Other Financial Institutions as issued by CBSL - "(a) "In discharging its duties the Board is expected to ensure that the financial institution complies with all relevant laws, regulations and codes of best business practices. (b) Communicates with shareholders and other stakeholders effectively." and (c) "Whether the interest of the depositors or creditors or potential depositors or creditors of the financial sector institution are or are likely to be, in any way threatened by the person holding office of director."

There is a need for constructive criticism of the Central Bank (CBSL) to act in time.
I have plenty of experience of the lackadaisical attitude, lack of foresight, gross negligence etc. dating back to the first industrial export (apparel); through the years of the shameful Mercantile Credit fiasco (headed by a former Governor), and other finance company debacles to the Pramuka Bank failure ascribed to influence and corruption but badly camouflaged by delays and arrogance of the ignorant. This was salvaged thanks to the Appeal Court decision reinforced by the Supreme Court. It is clear that Commercial Bank issues have again been clouded by the CBSL and rescued again by the Appeal Court. Each one is a long story, some poignantly sad but interjected with hilarious but true episodes.

My comments were consistently made with fairness and equity; always only to improve - with goodwill to all; malice to none! I read from the Directors’ Report Page 74 (Quote) "All those responsible for ensuring compliance with the provisions in various laws and regulations, quarterly confirm their compliance to the Board Audit Committee."

That cannot be correct. The attempt to seize control of the Board is a serious violation confirmed by the court's stay order, and should have been reflected in the report. It could have been construed that I even included the chairman for taking responsibility for not presenting a true and correct view in the report, by this omission, of the failed attempt to take control of the Bank by a direct competitor group. He had obviously been outnumbered at the Board.

From Knowledge Management Report - Page 40 (Quote) "Integrity is the essence of any corporate entity, more so in the case of a financial institution. Transparency enhances public confidence and public confidence is vital if we are to build value for all our stakeholders."

We are at the very historic crossroads of establishing good governance and it has become our responsibility to deliberate on the appointment of directors and auditors. The ongoing tussle to obtain control of the Commercial Bank has brought to light, the "Good, Bad and the Ugly" facets of Banking and Corporate Governance, and related public confidence. The Good must prevail!

We need a dedicated and united Board of Directors to meet ferocious competition while offering the best healthy choices to the public. We undoubtedly had these attributes for a long time but that unity was sadly broken at the altar of petty interests recently.

In addition to the court stay order, the character of the DFCC had drastically changed from that of a state-controlled Development Corporation at its inception, to the now privately-controlled, intensely competing bank, with interests directly conflicting with those of the Commercial Bank. The DFCC nominee Directors should have taken cognisance of the above and resigned. They should not continue to act in contempt of all decent principles by remaining on the Board.

I submitted that the appointment and remuneration of Directors and Auditors must be fully discussed by the shareholders. The independence of the auditors must be reinforced by the independent and minority shareholders. Auditors have to audit the actions of the management which is appointed by the controlling interests. The Auditors could be really independent only if, in accordance with lofty principles, the controlling interests stand aside and allow the independent investors and minority shareholders to have a major say in this matter. The directors are voting fancy remuneration. Executive Director's emoluments have increased by 20 percent to Rs 21.25 million. Compare this with the very small yield to the shareholders (less than one third of inflation). Auditors' fees have risen by 33 percent. Overseas experiences concerning Enron, World Com, Arthur Anderson, and as one top magazine titled it "Angst & Young", need not be visited on our poor country and its poor shareholders. The Best Bank should lead the way.

Some detractors bemoaned that the AGM had been prolonged. They attend the AGM only to fraternise with the directors, partake in refreshments and blissfully go home. Any serious discussion of the issues involved is a terrible barrier before the short-eats and coffee. Many errant chairmen of companies encourage and pamper this kind of shareholder, to finish the meeting early without discussing any substantive issues.

To his credit, the Commercial Bank chairman did not descend to this type of tactic and in contrast engaged in healthy dissent politely, and accepted correct positions after due deliberations.

The anonymous "minority shareholder" should read The Sunday FT of April 9 carefully and the correct answers are all there. With regard to the EGM, the article "DFCC Wrecks ComBank Meeting" is accurately titled. Mr. Fonseka had further proceeded well to amply prove the point which I made: that the DFCC's interest was conflicting.