In part 3 last week dealing with GuySuCo’s 2008 annual report, I opined that Ms Geeta Singh-Knight’s role in the collapse of Clico the insurance giant, and the loss to Guyana of close to G$7 billion made her unfit to be a director of the state-owned entity. Co-incidentally, the editorial pages in two of that day’s newspapers carried a report of President Jagdeo’s defence of Ms Singh-Knight, excusing her conduct as Clico’s CEO, and effectively the keeper of the company’s finance, as an “error of judgment.” Those pages also carried a letter by Mr Keith Burrowes, a director of GuySuCo, responding to criticisms about the qualifications and suitability of the directors.
These are relevant to this series on GuySuCo because directors set the benchmark for competence, integrity, professionalism, and independence, key elements for corporate governance and success in any organisation. Directors, as persons charged with turning around GuySuCo, need the wisdom of Solomon, the strength of Sampson, the courage of Shadrach, and the integrity of Mandela.
Let us see how the directors measure up, starting with Mr Burrowes who I have known for many years in a professional, client-auditor relationship. I admire his exemplary capacity for hard work, dedication and commitment to country. I believe his integrity is impeccable, but wonder how he reconciles his personal integrity with serving as Chairman of the board of the Guyana Chronicle. He can be neither unaware of, nor insensitive to, the lack of journalistic professionalism of the Chronicle which is never reluctant to engage in or promote personal attacks on the government’s perceived opponents, or of the paper’s lack of fairness and balance, and of its sometimes undisguised propaganda. If I can fault Mr Burrowes, it is not only for his lack of courage in ensuring to all Guyanese access to our nationally owned and financed newspaper, but for his failure to recognise that by lending his credibility to what is essentially a political job, he undermines the other commendable work he does and service he offers.
Notwithstanding his lack of any experience or expertise in agriculture or sugar, I believe that in a team of complementary skills, Mr Burrowes can make a valuable contribution to GuySuCo. But only if he recognises his limitations in relation to the massive challenge facing the industry and the corporation, and can demonstrate the courage to stand up for what he knows is right, even as a minority of one. As I will discuss later in this series, I believe that that reservation is not without good reason.
In defending Ms Singh-Knight, President Jagdeo says she brings special skills to GuySuCo, and excuses as errors of judgment, her role in Clico. This simplistic assessment invites speculation on the possibility of other reasons, since no rational person would describe as mere judgmental mischance sustained actions by a chartered accountant and business executive, causing losses to the NIS, policy-holders and pension schemes, of close to seven billion dollars. Forget for a moment that the President showed such antipathy towards the directors of Globe Trust who, in response to an order by the regulator for an increase in the capital base of the fledgling financial institution, put up their houses as security for a book entry loan. By contrast, Ms Singh-Knight ignored letters from the Commissioner of Insurance (COI) about her company’s non-compliance with the Insurance Act, and could consider herself doubly fortunate that the COI acted with such excessive – and as it turned out – costly restraint and tolerance. Forget too that Mr Steve Backer – and this is no defence of him – had to leave the company in an adversarial legal controversy over benefits to which he claimed he was entitled. By contrast, Ms Singh-Knight is back in the position and control of key company records of potentially legal interest and significance, even though a Judicial Manager has been appointed. Forget too, that the President was prepared to travel the Caribbean to beg for fungible sums of billion of dollars to correct Ms Singh-Knight’s “misjudgments.” By contrast, the depositors of Globe Trust received empty promises, but no money.
The list, the list
President Jagdeo seems to be unaware of the role and duties of a director under the Companies Act, and of the penalties under the Insurance Act. The duty of care, diligence and skill developed and established by the common law has evolved into a statutory form. It is reasonable to expect that Ms Singh-Knight would, in executing her duties as a director and officer of Clico, apply those skills which the President bestowed on her. The general principle is that what is expected of a corporate director in matters of conduct and judgment depends on the particular qualifications as well as the size and structure of the corporation, the composition of the board of directors, and the distribution of duties among the directors and officers, among other things. In relation to the Guyana company, Ms Singh-Knight was more than a director and an officer of Clico. Her powers seemed more akin to that of a corporation sole, or the President/ Chairman/ CEO /CFO wrapped into one.
The Companies Act 1991 substantially upgraded the common law requirement for diligence, raising the bar to that of a reasonably prudent person. Shipping out all that money to a dubious related party hardly qualifies as an exercise of diligence, particularly when the regulator writes to you on more than one occasion, putting you on notice. But apart from the reckless disregard for the Insurance Act and of the principles of prudential investing demonstrated by the company under her stewardship, questions have been raised about the payments made out of the $1.5 billion the company received from the sale to the New Building Society (which co-incidentally is chaired by GuySuCo Chairman Dr Nanda Gopaul) of its investments in the Berbice Bridge Company Limited of which she is the President’s hand-picked Chairperson. More than any presidential endorsement, the publication of the list of persons who were the recipients of the pre-collapse payout by Ms Singh-Knight would answer many of the nagging suspicions that linger about the real reasons why the President is resisting an investigation into Clico’s demise, as well as allay concerns about the “special skills” she brings to the board of GuySuCo. Failure to provide such a statement can be interpreted that transparency is not an ingredient or yardstick for governance in GuySuCo.
Another of the directors who are part of the turnaround leadership is Mr Donald Ramotar, General Secretary of the PPP/C and the longest serving post-1992 director, although his exact qualification, role, or representational interest for a board position, and as a survivor after the recent housecleaning, is far from clear. Then there is Dr Rajendra Singh, who is reported to be associated with the ruling party from afar, but whose worth to the corporation is considered so valuable that he is flown in to attend meetings of the board. In 2008 the corporation paid to Dr Singh fees of $70,000 and expenses of $2,020,000. That was smaller only to the $13,335,000 in expenses paid in the same year for Mr Errol Hanoman, CEO and $3,387,000 in expenses for Chairman Ronald Alli.
The only director with any field operations experience is Mr Jangbahadur Raghurai, who at 74, has been brought out of retirement to help work on the turnaround plan and to join the board. He is the only one of scores of former managers, many younger than he, who are available and might have responded to a recall to help revive and restore an industry and company they served for the better parts of their lives. That would have been at least as cost-effective as the expenditure on new recruits for whom the first five years with the corporation – if they stay that long – is an investment.
Chairman of the board is Dr Nanda Gopaul of the Office of the President, a top political public servant, whose regard for good corporate governance at the New Building Society has been an issue for some members whom he told, “We have Region 6,” in reference to the election of the directors. His appointment as Chairman will ensure that the President for the time being, is represented in the boardroom, and that his wishes can be directly conveyed to the directors.
On the other hand, the CEO’s relationship with the sole shareholders has never been an easy one, and he is generally regarded as more closely associated with Booker Tate than with the corporation. It is understood that his contract will expire within a year, with another succession issue to deal with. Except for the CEO, the board is a political board, likely to bow to the wishes of those who appointed them, rather than bring their own expertise, and exercise their own judgment, in managing the affairs of the corporation. In passing, one recalls the agreement between Hoyte and Jagdeo that the opposition should have a seat on the board. That held for a while, but through default and lack of interest by the PNCR, that agreement is now ignored, to the detriment of all.
Confronting the gravest threat unprecented in its centuries of existence; the failure of sugar in several regional countries and across the world; the global downturn and uncertain recovery; and radical shifts in demand, industrial capacity, and market prices, all required the turnaround team to address the industry and the corporation’s future honestly and boldly.
It required the application of some of the most sophisticated approaches and strategic tools in management science, economics, marketing, human resource management, and managerial accounting. The last thing it needed were elementary spreadsheets and assumptions more appropriate to business planning for an individual enterprise, prepared in a matter of a few months, and acting largely on political directives.
My view is that, not only have the directors accepted a basket to fetch water, but individually and collectively they lack the necessary ingredients to stem the decline of the industry and cash drain of the corporation, let alone return them to success. All the persons referred to above were deeply involved in the Blueprint for Success, the so-called turnaround plan. Sugar is grown in the fields, processed in the factory, sold in the marketplace and accounted for in the office. As we shall see over the next couple of articles, that schematic appears to have had insufficient attention in the document that contains several conceptual flaws, some naive assumptions, and elementary mistakes.
According to the plan, the workers have lots of obligations for the success of the industry, but and instead of corresponding rights, they are expected to accept a decreased share of the corporation’s revenue. In ‘Appendix 1, Impediments for Success,’ the “union and workers” are required to co-operate with management to stop the decline in attendance and incidence of strikes. The “union” is required to convince members to adjust to rewards for production, while the “unions” must support cost rationalisation. Is it a mistake that in two cases only the singular union is identified, while in the other it is more than one? And if it is not, which is the one union that has been singled out to carry such responsibility?
It would be merely a personal matter if the plan simply reflected the professional competence of those involved in its preparation. It would be unfortunate if it was done with such haste as to ignore the real problems, causes and structural weaknesses of the industry and the corporation. But that the plan is being used by the Jagdeo administration as the basis to plough into the corporation further billions of dollars of subsidies which the rest of the economy can ill afford, makes it a disaster of national proportions.
To be continued