Raphael John-Lall

CEO of the Caribbean Cor­po­rate Gov­er­nance In­sti­tute (CC­GI), Kam­la Ram­per­sad de Sil­va be­lieves that there are pros and cons of po­lit­i­cal ap­pointees and boards of state en­ter­pris­es re­sign­ing af­ter gen­er­al elec­tions.

There has been a wave of res­ig­na­tions from state boards since the gen­er­al elec­tion vic­to­ry of the Unit­ed Na­tion­al Con­gress (UNC) on April 28.

Among those who ten­dered their res­ig­na­tions down was Sahid Ho­sein, who re­signed as chair­man of the Na­tion­al Pe­tro­le­um Mar­ket­ing Com­pa­ny (NP) one day af­ter the elec­tion. Ac­knowl­edg­ing his sta­tus as a po­lit­i­cal ap­pointee, Ho­sein said it was “the right thing to do” to al­low the in­com­ing gov­ern­ment to in­stall its lead­er­ship.

Al­so step­ping aside was Shameer “Ron­nie” Mo­hammed, chair­man of Caribbean Air­lines, while Michael A A Quam­i­na, SC, demit­ted of­fice as chair­man of Trinidad Pe­tro­le­um Hold­ings Ltd (TPHL) last Thurs­day.

Ram­per­sad de Sil­va res­ig­na­tion af­ter a change of gov­ern­ment is not clear-cut and there are many fac­tors that could de­cide if a chair­man of a state board and the en­tire board should re­sign or not af­ter a gen­er­al elec­tion.

“There are some ad­van­tages to re­place­ment of boards, but al­so some huge draw­backs. The ad­van­tage is that the new gov­ern­ment can fill these po­si­tions with peo­ple who sup­port their poli­cies and who will there­fore gov­ern in align­ment with their man­date. This is wide­ly prac­tised un­der the West­min­ster sys­tem. How­ev­er, in some in­stances, the di­rec­tors re­sign and demit of­fice leav­ing the or­gan­i­sa­tion with­out a board.”

She point­ed out that the draw­backs of hav­ing the en­tire board re­sign could be quite sig­nif­i­cant, since the board is nec­es­sary for over­sight of the com­pa­ny’s re­sources, in­clud­ing ma­jor ex­pen­di­ture and su­per­vi­sion of man­age­ment.

“A state en­ter­prise with­out a board there­fore can­not func­tion ef­fec­tive­ly. Giv­en that there are 37 whol­ly owned, six ma­jor­i­ty owned, four where gov­ern­ment owns less than 50 per cent; and the ad­di­tion­al 86 state boards which are in­di­rect­ly owned, and the time tak­en to find the hun­dreds of di­rec­tors need­ed for the many state boards and lack of over­sight can have se­ri­ous con­se­quences,” said Ram­per­sad de Sil­va.

She said there are ex­am­ples of some state en­ter­pris­es with­out a board for more than a year, which can neg­a­tive­ly im­pact ser­vice de­liv­ery to cit­i­zens, be­cause all state en­ter­pris­es are set up for a spe­cif­ic pur­pose to serve the coun­try.

She added that di­rec­tors have a fidu­cia­ry du­ty to look af­ter the best in­ter­est of the com­pa­nies they serve.

“This is both a le­gal and eth­i­cal oblig­a­tion. These du­ties re­quire di­rec­tors to act hon­est­ly, dili­gent­ly and in good faith and to avoid con­flicts of in­ter­est. These are oth­er­wise known as the du­ties of loy­al­ty and du­ty of care and ap­ply to all di­rec­tors, whether they serve on state boards or in the pri­vate sec­tor. As such, when con­sid­er­ing the change in gov­ern­ment, di­rec­tors of state en­ter­pris­es are bound by these fidu­cia­ry du­ties and so must con­sid­er the ef­fect of a res­ig­na­tion on the or­gan­i­sa­tion. This is be­cause there is not a one-size fit all sce­nario and an ab­sent board can ren­der an or­gan­i­sa­tion un­able to func­tion,” said Ram­per­sad de Sil­va.

Best prac­tise

Ram­per­sad de Sil­va said it has been the prac­tice that many di­rec­tors of state boards of­fer their res­ig­na­tions so as not to fet­ter the new gov­ern­ment.

“Some di­rec­tors sub­mit an un­dat­ed res­ig­na­tion let­ter, and they con­tin­ue in the po­si­tion un­til the res­ig­na­tion is ac­cept­ed by the new gov­ern­ment. How­ev­er, for­mer CC­GI Chair­man Ron­nie Bisses­sar SC ad­vis­es against this prac­tise as he says that it is not ap­pro­pri­ate at any time to of­fer an un­dat­ed let­ter of res­ig­na­tion. He rec­om­mends in­stead that the best prac­tice may be for the chair­man of the Board to write the new line min­is­ter (when ap­point­ed and not be­fore) ad­vis­ing that the di­rec­tors (ei­ther all of those who have so in­di­cat­ed) are pre­pared, in prin­ci­ple, to re­sign as di­rec­tors with im­me­di­ate ef­fect and will await fur­ther guid­ance from the Min­is­ter and Cor­po­ra­tion Sole. He added to, that the let­ter should be copied to the Sec­re­tary and Cor­po­ra­tion Sole.”

She al­so said that di­rec­tors are bound by their fidu­cia­ry du­ty to act in the best in­ter­ests of the or­gan­i­sa­tion, and not the share­hold­er which in this case, the gov­ern­ment.

“State-ap­point­ed di­rec­tors are nonethe­less ex­pect­ed to car­ry out pol­i­cy di­rec­tives of their ap­pointors. As such, and in the ab­sence of clear leg­is­la­tion which pro­vides guid­ance in re­la­tion to the sta­tus of di­rec­tors when a gov­ern­ment changes, it is pru­dent for the pre­vi­ous­ly ap­point­ed boards to con­tin­ue to pro­vide op­er­a­tional over­sight un­til a new board is ap­point­ed, in or­der to en­sure con­tin­ued sta­bil­i­ty. It is to be not­ed though that this prac­tice is not man­dat­ed by any reg­u­la­tions or oth­er writ­ten guid­ance such as what ob­tains in Ja­maica.”

She al­so said that know­ing that there is a new ad­min­is­tra­tion with a new man­date, ex­ist­ing di­rec­tors should not make any new de­ci­sions or start any ma­jor projects with­out the con­sent of the new line min­is­ter. So, in essence, they serve in a stew­ard­ship ca­pac­i­ty un­til their term ex­pires or a new board is ap­point­ed.

Fur­ther, she re­ferred to the CC­GI’s curent chair­man, Nigel Ro­mano, who rec­om­mends that the out­go­ing board pre­pare a brief­ing note for the in­com­ing board that high­lights key is­sues and con­cerns. He added that this can be sup­port­ed by an of­fer to meet the new board to dis­cuss the cur­rent strate­gic di­rec­tion and im­per­a­tives as well as the ex­ist­ing chal­lenges and ar­eas of fo­cus.

Ram­per­sad de Sil­va al­so said that in Ja­maica, CC­GI di­rec­tor Camille Facey ex­plains that the Cor­po­rate Gov­er­nance Frame­work for Pub­lic Bod­ies clear­ly states that all board mem­bers must of­fer their res­ig­na­tions but must re­main in of­fice un­til a new board is ap­point­ed.

She added that Facey has not­ed that there are cer­tain types of de­ci­sions in­clud­ing de­ci­sions re­lat­ed to ap­point­ment of CEO, which an out­go­ing board is not au­tho­rised to make dur­ing this pe­ri­od. Fur­ther, the reg­u­la­tions to the Pub­lic Bod­ies Man­age­ment and Ac­count­abil­i­ty Act in Ja­maica, say that at least one-third of the board is to be re­tained, which en­hances con­ti­nu­ity.

In­de­pen­dent di­rec­tors

Fol­low­ing last week’s elec­tions, Richard Young, a for­mer pres­i­dent of the Bankers’ As­so­ci­a­tion of T&T, a for­mer chair­man of the T&T Fi­nan­cial Cen­tre (TTFC) and fa­ther of for­mer prime Min­is­ter Stu­art Young on his Linkedin pro­file ad­vo­cat­ed for more in­de­pen­dent di­rec­tors on state boards.

“I re­signed from the Chair at TTFC the day af­ter our gen­er­al elec­tions, fol­low­ing the change in gov­ern­ment. This has trig­gered my mem­o­ry on a writ­ing I did over 20 years ago. Thought I would resur­face as it is more than rel­e­vant to­day!

“With the cus­tom­ary wave of board res­ig­na­tions fol­low­ing a change in gov­ern­ment, a long­stand­ing gov­er­nance gap is once again ex­posed. Twen­ty years ago, I pro­posed a pol­i­cy that re­mains ur­gent to­day: ap­point at least one-third of state board mem­bers as in­de­pen­dent di­rec­tors. This en­sures con­ti­nu­ity, ac­count­abil­i­ty, and prop­er over­sight dur­ing po­lit­i­cal tran­si­tions—es­pe­cial­ly in crit­i­cal state en­ter­pris­es. While po­lit­i­cal pa­tron­age pres­sures are re­al, good gov­er­nance de­mands a buffer of in­de­pen­dence to pro­tect na­tion­al in­ter­ests and main­tain sta­bil­i­ty,” Young wrote.

Ram­per­sad de Sil­va al­so com­ment­ed on the im­por­tance of in­de­pen­dent di­rec­tors.

“Per­sons who are vis­i­bly po­lit­i­cal­ly con­nect­ed, are right to be con­cerned about stay­ing in of­fice. Same for sen­si­tive boards like Her­itage Pe­tro­le­um, whose chair­man al­so re­signed.”

She then ar­gued that the ques­tion of in­de­pen­dent di­rec­tors for state boards is a more dif­fi­cult one.

“The com­mon per­cep­tion in T&T is that any al­liance or as­so­ci­a­tion with a po­lit­i­cal group­ing neu­tralis­es the is­sue of in­de­pen­dence. How­ev­er, it should al­so be not­ed that in­de­pen­dence of judg­ment is a re­quire­ment of the law in­so­far as con­cerns the ex­e­cu­tion by di­rec­tors of their du­ties as sit­ting board mem­bers. This in­de­pen­dence of view is un­der­scored by the le­gal re­quire­ment that each di­rec­tor must act pri­mar­i­ly in the best in­ter­ests of the or­ga­ni­za­tion. That said, T&T is still ma­tur­ing in terms of its cor­po­rate gov­er­nance prac­tices with change in gov­ern­ment since this has on­ly been the fourth change of po­lit­i­cal ad­min­is­tra­tion since 1962.”

She point­ed out that in­de­pen­dent di­rec­tors in the pri­vate sec­tor must, by de­f­i­n­i­tion, not own any shares or have any or close af­fil­i­a­tion to the com­pa­ny, such as hold­ing a com­pa­ny po­si­tion – is­sues which would af­fect their ob­jec­tiv­i­ty or neu­tral­i­ty in look­ing af­ter the in­ter­est of the com­pa­ny.

“With state boards one may al­so want to con­sid­er po­lit­i­cal af­fil­i­a­tion, and in a small coun­try like T&T this can prove dif­fi­cult for the num­bers of peo­ple re­quired for state boards.”