Ethics of Govt. servants
View(s):When a high profile public servant was recently appointed as a director of a listed company, it hardly raised any questions in the area of conflict of interests.
Dr. Sunil Navaratne, Secretary of the Ministry of Higher Education, was appointed to a subsidiary of the Hayleys Group in which Dhammika Perera, another Secretary to a Ministry is the single largest shareholder. Perera was a powerful businessman, serving as chairman of many companies he took over, before joining the public service, first as Chairman of the Board of Investment (BOI) and now as Transport Ministry Secretary.
While there is no issue about the capability of both individuals in management and other professional skills, the critical question is about the conflict of interests in public servants being on the board of private companies. During Perera’s tenure as BOI chairman, the Business Times, repeatedly in editorials, raised the conflicts that would arise since he had access to critical data of companies that one could take advantage to further business interests.
A lot of water has flown under the bridge since then and the authority does not seem to care a hoot about these accountability issues in the public service.
When the Business Times was raising these issues vis-à-vis BOI conflicts, it was stated by vested interests that the media has a mania about governance and conflicts of interests instead of minding their business. What arrogance.
If the media fails to perform its basic role of public watchdog and ensure basic fundamentals are followed in an organised society –be it in the public or private sectors – then anarchy takes over the rule of law and order.
In recent times there have been other appointments to private or listed companies that raise fundamental issues of conflict, even th0ugh these constitute retired government officials. A multinational milk producer has appointed a retired and once, powerful Ministry Secretary as its director of regulatory affairs while a multinational pharmaceutical company has taken on, in a similar position, the retired director of a government hospital.
Two former BOI directors and another retired Ministry Secretary have been appointed to organisations controlled by the former BOI chief. In the banking sector, the Central Bank (CB)-influence extends to Hatton National Bank (where former CB Deputy Governor Ranee Jayamaha is chairperson) and Commercial Bank whose chairman Dinesh Weerakody retires in June and would most likely be replaced by Deputy Chairman Dharma Dheerasinghe, a retired CB Deputy Governor.
Conflicts of interest have also been raised over retired diplomat Jayantha Dhanapala’s ‘alleged’ failure, as a director at Dialog, to object to the blocking of some websites including the Colombo Telegraph. Dhanapala is co-chair of the Friday Forum, a group of eminent people which expresses concern over governance and accountability issues.
Two top private sector executives who were appointed to public service positions many years ago recalled how they had to exit from all holdings, stakes and positions in private companies. “There was intense grilling by the Parliamentary High Posts Committee asking about our private stakes,” one former official said, explaining that they themselves exited from the private sector – lock, stock and barrel – before coming under parliamentary scrutiny, acutely aware of the conflicts.
Issues have also arisen over the appointment of independent directors with the method of appointment where companies select and then inform the stock exchange and the Securities and Exchange Commission. There are a set of rules in such appointments but opponents say the safeguards are insufficient to ensure such directors are indeed independent and act accordingly at board meetings.
The stakes are high in terms of financial incentives. The monthly salary of independent directors can vary from Rs. 25,000 (small listed company) to Rs. 300,000 in a large conglomerate. In addition to attending board meetings, they also sit on various committees as part of their mandate.
In the banks, independent directors are paid between Rs. 150,000 to Rs. 250,000 (or more) and governance analysts said most directors are reluctant to raise issues fearing they would be removed after serving one term only. On the other hand there are some honest and ethically correct professionals who serve in these positions with dignity and a sense of honesty and correctness.
“Independent directors are a joke,” one analyst said, adding that the best way to exercise their independence is for the Securities and Exchange Commission to have a list of eminent persons with varied professional skills from which companies can choose their independent director.
However there is the other argument put forward by governance advocate K.C. Vignarajah that independent directors should have some stakes/shares in the company and represent the interests of IMS (Independent Minority Shareholders), an issue he has been campaigning for a long time.Whatever process is followed, it is essential for some regulatory oversight in the appointment and conduct of independent directors whose role is to bring independent thinking into the board for the benefit of all its stakeholders including small shareholders and customers.
Finally the appointment of directors to boards of listed companies on the stock exchange and private companies dealing with essential goods appears to be getting murkier and murkier. Banking, pharmaceuticals, milk foods and some industries have got entangled in these appointments, that many years ago, would have been rejected in practice or through regulation.