Government using equity muscle to make listed bank board changes


The government, utilizing its equity muscle through shareholdings of state-controlled entities like the Employees Provident Fund, Employees Trust Fund, Sri Lanka Insurance Corporation, National Savings Bank and the Bank of Ceylon is moving to make board changes in several commercial banks quoted on the Colombo Stock Exchange.

Asked about this, Finance Minister Raving Karunanayake yesterday confirmed that "we are getting our act together."

Mr. Sunil Wijesinha, a much respected business leader who recently succeeded Mr. Hemaka Amarasuriya as Chairman of the NDB, and Dr. Ranee Jayamaha, a former Deputy Governor of the Central Bank who has been Chairperson of HNB, have already resigned the two banks announced in Stock Exchange filings on Friday.

Mr. R. Theagarajah, Director/CEO of the NDB said in a filing that Wijesinha "has indicated his personal wish to step down as Chairman of NDB and has also tendered his resignation from the Board of Directors of NDB with immediate effect."

But Wijesinha made clear that it was not his "personal wish" to quit but the wish of the Minister of Finance. This has been conveyed by the Managing Director of the Sri Lanka Insurance Corporation, a substantial shareholder, by letter.

Although Wijesinha has been asked to retire by March 31, he took the view that if it was the minister’s wish that he should go, he would resign immediately rather than preside over the bank’s annual general meeting to be held tomorrow.

HNB said in a filing that Dr. Jayamaha who was due to retire as a

director of HNB in provisions of the bank’s articles at the AGM to be held tomorrow (and would normally have been re-elected) has notified the bank that she would not seek re-election as a director at the AGM. As such she would cease to hold office as a director of the bank immediately on closure of the AGM.

The filing by HNB’s DGM (Legal) and Board Secretary also said that at a board meeting held on Friday afternoon "Dr. Jayamaha intimated her desire to relinquish her position" as Chairperson of HNB.

"Please note until such time the board is reconstituted, during the interim period, Director Mrs. M.A.R.C. Cooray (non-executive, non-independent) has been appointed the Chairperson of Hatton National Bank PLC with immediate effect," the filing said.

Earlier last week, Dr. Jayamaha told friends that she did not wish to remain in her position if "I am not wanted."

There was no word on who Wijesinha’s and Jayamaha’s successors would be but this might emerge at tomorrow’s AGMs of the two banks, analysts expected.

Some business sources thought that Wijesinha being Cabraal’s brother-in-law (his sister is married to the former Governor) my have influenced his departure. Wijesinha served the Sampath Bank as a director for 19 years and was also its deputy chairman.

He is credited with turning round the loss-making Merchant Bank of Sri Lanka to profit as its Managing Director. He has been on the boards of other financial institutions, stock broking companies and the Colombo Stock Exchange. He was also Chairman of the ETF and headed Dankotuwa Porcelain.

Former Central Bank Governor Nivard Cabraal said yesterday that the previous administration did not force out incumbent chairpersons of listed commercial banks where the state had equity influence. He cited the examples of Messrs. Rienzie Wijayatillake (HNB) and Mr. Dinesh Weerakkody (Commercial Bank) who retired from these positions after holding them for a number of years.

The finance minister made the point that state influence had been used to make bad appointments and cited two examples – Mr. Lakshman Hulugalle who was made a Director of the Commercial Bank and Mr. Nimal Perera against whom accusations of stock market manipulation had been made (though not proven) as Chairman of Pan Asia Bank.

Board seats on highly profitable commercial banks are lucrative, commanding very high fees running into lakhs even for non-executive directors whose duties usually involve attending board meetings. One well informed source said that a chairperson of some commercial banks may be paid as much as Rs. 500,000 a month and be provided a Mercedes Benz (or other high-end car) at the bank’s expense.

Many banks also provide their chairpersons with plush offices.

"I know of one director (of the DFCC Bank) who takes no fees," one well informed source said. "Perhaps he’s the only such person."

Most listed companies do not declare how much individual directors are paid. Their annual reports carry a lump sum of fees and remuneration of the directors, including executive directors, without an individual breakdown.

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