In the comments page of the Guardian’s Web site, underneath last week’s BG View, which was headlined “How did $100 billion CL Financial become a $7 billion company?” someone whose Internet name is Sam Saldenha asked a question that has been bothering me for some time. Referring to a sentence that noted that Gerald Yetming serves as the chairman of CL Financial, Clico, Angostura and the Jamaican rum producer Lascelles deMercado, Mr Saldenha (or maybe it is Ms or even Mrs, in which case my apologies) asked: “Isn't this a clear case of conflict of interest, or does this term rings hollow in TnT? Surely he cannot be seeking the company’s interest and the taxpayers' interest. Please stop insulting the intelligence of Trinbagoians....He cannot be the government pointman. People put a lot of faith in this government, expecting them to clean up the mess....Find another person who is not connected to Clico or its subsidiaries.”
To rephrase the Saldenha question somewhat, should someone who has been appointed by the Government to serve as the chairman of CL Financial also serve as the chairman of Clico, which is a subsidiary of CL Financial, as well as the chairman of Angostura and Lascelles deMercado, both of which are publicly listed companies with thousands of individual and institutional investors? Can Mr Yetming serve the interests of the Government, while also, and at the same time, serving the interests of the CL Financial shareholders—who include, lest it be forgotten, the former CL Financial chairman, Lawrence Duprey? The CL Financial matter is at the point where the Government has almost completed the payment of over $10 billion in cash and bonds to the Clico policyholders and the investors in the Clico and British American (BAT) mutual funds. The three-year June 12, 2009 Shareholders Agreement expired on Tuesday (and was extended for another six months by the CL Financial directors last week Wednesday with that extension being ratified by the CL Financial shareholders on Friday).
The main aim of the Government-appointed directors on the CL Financial and Clico boards should be to ensure that the taxpayers of this country are provided with a proper accounting of the taxpayer funds disbursed to save Clico, Clico Investment Bank (CIB) and BAT. The second and more important aim of these Government-appointed directors would be to ensure that taxpayers are able to recover, from the assets of CL Financial, all the monies that were pumped into Clico, CIB and BAT, which are all private companies. On the other hand, it surely would be in the interest of the shareholders of CL Financial to ensure that the company that is returned to them at the end of the Government’s intervention has some financial value. Can these two goals be achieved? In other words, can taxpayers receive full recovery of the monies pumped into the CL Financial group AND the shareholders of that group receive value after the intervention? It may be that both goals can be achieved. It may be not.
In order to achieve the Government’s goals with regard to CL Financial, it may be that the interests of the shareholders would have to be subordinated...or vice versa. In the case of the subordination of the interests of one as opposed to the other, whose interests should the Government-appointed directors of CL Financial—who are Yetming, Phillip Marshall, Joseph Teixeira and Adanna Toney—serve? The Government/taxpayers’ interest or the interest of CL Financial? The law of this country is that the directors of a company have an obligation to “act honestly and in good faith with a view to the best interests of the company,” and that they should “exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.” Please see Section 99 (1) a and b of the Companies Act. The Companies Act, at Section 99 (2), also states: “In determining what are the best interests of a company, a director shall have regard to the interests of the company’s employees in general as well as to the interests of its shareholders.”
And at Section 99 (3): “The duty imposed by subsection (2) on the directors of a company is owed by them to the company alone; and the duty is enforceable in the same way as any other fiduciary duty owed to a company by its directors.” In other words, all the CL Financial directors—whether appointed by the Government or the shareholders—have a duty to serve the best interests of the company alone and in so doing they must have regard to the company’s employees in general as well as the CL Financial shareholders (including Lawrence Duprey). Given what the companies law states, there is also an issue of whether the same person should serve as the chairman of both CL Financial and Clico and also serve on other subsidiary boards. Does the fact that Shafeek Sultan-Khan served as chairman of CL Financial, Angostura and Lascelles deMercado (but not of Clico) legitimise Mr Yetming continuing to serve as chairman of four companies? Does the fact that Euric Bobb served as chairman of Clico and MHTL (but was chair of both CL Financial and Clico for less than a month) make it okay?