Due process with checks and balances imperative for good governance of banks: not discrimination based on age, very valuable experience in the most competitive/confidential banking sector.
“There shall be no discrimination based on age, gender, race, religion, ethnicity, etc” -- this is a fundamental requirement of top companies and banks worldwide. Alas, in this age and time in our country, we seem to be having discrimination against valuable experience, honesty, executive ability, impartiality and maturity to ensure balanced consideration of differing and contentious issues.
The main corporate law of the land – the Companies Act 7 of 2007 allows shareholders to decide on the capacity of a Director who is above 70 years of age to be appointed/re-appointed to the board at the AGM. This provides the opportunity to take decisions in the best interest of the company, since the majority of the shareholders will decide on the suitability of a Director to continue to function as Director in the company’s Board while taking cognizance of a person’s age, ability, integrity and experience.
The Central Bank Of Sri Lanka (CBSL)-undertakes inspection, investigation ,supervision and regulations; nominees to the Board which directs the operations of the bank is in direct conflict with the beforementioned responsibilities. Institutionalized conflict of interests! Regulators appear to solicit directions of regulated banks to solicit directorship/s for their own members and their nominees.
Warren Buffet (WB) the world’s business legend, unparallel fund manager/ investment maestro is a “hands on” top executive and follows up on the performances of the very large conglomerate/companies he indirectly controls. Warren Buffet has 50 years experience at the top and is only 80 years young!
The Executive President of our country is 67+ has an enormously more onerous job and responsibilities on a 24/7 basis! Surely the Cabinet of Ministers, the top policy making body and even the Governor of the Central Bank of Sri Lanka will not expect the President to give up power on his 70th birthday.
However, the recent directions of the Monetary Board, of which the Governor of the Central Bank of Sri Lanka is the Chairman, issued under the Banking Act No 30 of 1988 as amended states that the age of a person who serves as a Director shall not exceed 70 years. Further the time period of service of a Director shall not exceed 9 years.
Why a special provision such as this was introduced only in Sri Lanka? A provision of this nature was not introduced in other countries like the UK, USA, or Europe. The reason for the introduction of such a provision in Sri Lanka is purely for political reasons. The publicly listed banking industry was vibrant and independent of any political allegiance up to 2007.
Was it with the intention of taking strong but indirect / informal control of the Boards of private sector banks, while having formal control as a regulator, that the politically aligned Central Bank Governor introduced these directions ? He could very well send off the really independent and well experienced Directors of these private sector banks in order to fill their vacancies with his own people so that they would be in the bank Boards. Good corporate Governance requires boards not to get in Directors with conflicts of interests in any form in order to prevent dominance and interference. How then could such appointments to top positions to the banks’ Boards made by the Central Bank Governor to suit his preferences be termed as Good Corporate Governance? There certainly is going to be dominance, interference and political pressure within the banks because of such appointments, thus preventing these institutions from operating effectively.
An overpowering bloated political corrupted inefficient, state sector is narrowing and crowding out the independent higher productive creative, competitive, socially conscious public listed widely held private sector companies which are the backbone of a civilised democratic society which would create the sustainability of a booming economy. Good public listed corporates would ensure the distribution of economic benefits to the large mass of people.
(The writer has filed a petition in the Appeal Court challenging Central Bank rules pertaining to the tenure of a director of a board and age barriers)