Despite clear rules pertaining to directors resigning under the Central Bank’s governance rules, some directors set to step down in December 31, 2011 are banking on political clout to stay on.
“They still want to remain – after such a long innings – and are appealing to higher-ups for an extension,” said a senior government official.
At a meeting of CEOs and the Central Bank last week, the issue was raised by one of the bankers to which the Governor responded saying firmly that the board of directors was given three years to find replacements for those exiting under these rules.
The rules were brought into enforce governance in the boardroom, accountability and responsibility. Under these rules, directors serving a continuous 9-year period upto December 31, 2008 were entitled to a 3-year extension till December 31, 2011.
Fifteen appointed/elected directors including the chairmen of Commercial Bank and Sampath Bank are to exit under these rules.
The governance rules were in fact challenged in the Supreme Court in 2008 where it was also sought for founder directors to be given a 5-year extension after the 9-year period ended. In a September 1, 2008 ruling, the court comprising Chief Justice Sarat N Silva and Justices J. Amaratunga and J. Sripavan decreed that that all directors (including founder directors or incumbent chairman) would serve a maximum of nine years (ending December 31, 2008) and an additional three years (till December 31, 2011).
The same order also directed that those reaching the age of 70 years in 2008 ‘may continue in office for a further maximum period of three years from 1.1.2009.”
Banking sources said the rules and the Supreme Court verdict are clear in that no extension can be given for those directors who have served a total of 12 years after the rule was enforced or those who are now 73 years of age.
Governance experts also broached the issue of whether long-standing directors want to stay on board to serve their own interests or that of the company.
Many years back in 2005, Charitha de Silva, a former chairman of Aitken Spence wrote an interesting letter which was published in the then Sunday Financial Times about the events relating to the battle for control at Commercial Bank. There, referring to the role of directors, he said: “The large majority of nominated directors do not realise that their primary responsibility is to the company on whose board they sit. If there is a conflict of interest it is their duty to declare it and exit a meeting when the contentious issue is being discussed.
It is the duty of the Chairman to ensure that this procedure is followed. These are principles that have been clearly enunciated in the Code of Good Committee Behaviour that the Ceylon Chamber of Commerce and many other institutions have adopted.” |
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