Presentation On Public Boards - 23 March 2015

In our tribal culture, with a change of government come changes in some if not most boards of  statutory corporations and other government appointed or controlled commissions, authorities, 

companies and entities. I refer to these as public boards.  

A position on a public board is too often regarded as a plum for big supporters and a form of reward for persons who worked hard for the election of their candidate. Such appointments carry pay and perks.  They carry power to hire and fire and to make important decisions. As a result they carry prestige. Not much thought is given to the responsibilities which come with the money and the perks and the power and the prestige.

Before I proceed let me refer to the Four Seasons Accord which is the name given to the national agreement made in November 1994 between all political parties in the Federation and civil society  organisations to resolve the disputes and violence which arose from the 1993 general election. 

The Accord called for “a complete review of the system of appointments to Government Commissions, Boards, Corporations, Authorities and other agencies with a view to establishing greater independence and efficiency in the operation of these bodies”

That agreement has not been honoured by any government since. Loyalty to the party in power has for the most part remained the first qualification for appointment. Loyalty has superceded the requirements of skill, knowledge, independence and  competence.

In the hope that the new government will not fall into the same trap I offer a commentary on some of the responsibilities which come with the position.

1. In the case of statutory bodies the duty of the director is owed to the country and not to the Minister or the Cabinet. The board of a statutory corporation is entrusted with power and publicly owned assets and charged with operating the relevant enterprise or service in accordance with the empowering statute and the national interest. Thus while Cabinet or the Minister may appoint the board and dictate policy, directors are required to exercise their own judgment in implementing the policy. If that were not the case there would be no need for a board. In other words a board is not a rubber stamp.

2. In the case of a government owned or controlled company the duty of the director is owed to the company as a whole and not to the government or any Minister. To give a simple example if government were to apply for a loan from National Bank the directors have to detach themselves from their politics and consider first and foremost whether the loan is commercially viable and in the best interests of the bank. They must exercise their duty in that way regardless of the fact that Government voted its majority shares in the bank to appoint them. Their duty is owed to all two thousand plus shareholders and to the bank's thousands of depositors, not just the government.

3. A director must know the powers given to him and the board by the statute, in the case of a statutory body, or the Articles of Association, in the case of a company. That seems to go without saying but my experience is that many directors do not know and do not consult the documents until there is a problem. Sometimes that can be too late.

4. The board of a statutory body or government controlled company which is engaged in business activities e.g the Port Authority, NHC, SKELEC, The Cable, National Bank, ZIZ generally has oversight of the business of the entity. The board in most instances appoints management which runs the business on a day to day basis. Management so appointed should be carefully and independently selected and should be capable of running the entity. Unless a director is given managerial powers he or she should let management run the business subject to the oversight of the board. Too often directors think they have power to intervene in day to day decisions. That often frustrates and hinders management. What if six directors were to give six different directions. That just could not work. A board is not supposed to micro-manage a business. Some directors try to show their power and to compensate for their lack of competence to do their real job by trying to delve into day to day decisions. That is where allegations of political interference often arise.

5. Unless a statute says so there is no requirement that a director have any specific qualification, degree or profession. The standard is generally that the director act honestly and in good faith with a view to the best interests of the entity and that he or she exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. That is the definition in the Companies Act which would apply to most statutory bodies as well. Directors may have different skills and different  areas of expertise. That can be helpful in providing a balance on the board. There is however one skill which every director of an entity, public or private, carrying on business must have and that is a basic understanding of accounts. 

How otherwise can a person properly direct the entity. If the director does not have that knowledge it means that he or she will not know how the company is doing financially and will be unable to participate properly in review of the operations of the entity or in financial decisions and planning. It will mean that management or other directors can fool him or her. Each director must participate in those key areas. A director abdicates his duty if he simply leaves such decisions up to others on the board. A person who cannot read accounts is not suited to appointment to any public board which is required to account. 

6. A conflict of interest may arise between the interest of the entity and the personal interest of a director. The general rule is that the interest of the entity must prevail and a director will be liable to cough up any benefit he or she received if the director preferred his personal interest. Personal in this case includes political. A director should be familiar with the rules which apply to his or her disclosure of conflicts or potential conflicts. 

7. Conflicts can exist which make a person unsuitable for a position on a public board. For example you would not expect a director of a major trading company in St. Kitts or Nevis to be appointed to the board of National Bank.

That could give him or her access to the accounts and confidential information of his competitors which would be improper. You would not expect a building contractor or a building materials supplier to be appointed to the board of NHC. Likewise an architect or engineer or other construction professional  who submits applications to the Development Control and Planning Board should not be a member of that board. Even though he can recuse himself from participating in decisions of the board relating to his applications, his membership of the board will give him intimate knowledge of plans presented by his  competitors. It also gives the impression that he or she is in a position to exert influence on the board. Appearances of conflict can be as damaging as actual conflict and should be avoided. 

8. It should go without saying that a director must maintain confidentiality in respect of information which he receives in his role. If the information is such that it should be reported to the political directorate then the reporting should come via the board. If that principle were adhered to we would have less  accusations of directors being appointed as spies. 

9. Finally, a word on the Chairman of a board. The Chairman may have duties assigned to him by the statute or the Articles of a company over and above his duties as a director. The board may assign additional duties to him. If that is not the case then the Chairman has no greater powers than another director. I am constrained to make those statements because the culture has developed in respect of public boards that the Chairman is the Grand Chief and has power to control the board and to run the entity. That is an unfortunate culture and has contributed to political interference and the lack of independence of many public boards. I am not casting aspersions on any particular Chair of a public board but speaking of the public perception. 

I have by no means exhausted this topic but I hope I have said enough to warn the new government  and their supporters that public boards are not their property to do with as they see fit and there is a  responsibility to the country to appoint the best people available regardless of party or political  persuasion. And the people appointed are not expected to act as surrogates of the political directorate but as independent thinkers and decision makers within the powers given to them. 

I hope also that the government will follow the laws governing statutory corporations in tabling in the  National Assembly the accounts of those entities. It should go further and, even if not required by law, 

publish the accounts and ample reports on the activities of each entity. Government should also publish auditors reports. There should be debate in the National Assembly on each set of accounts. Only then will the government usher in the new dispensation and the real change to which they have committed of greater accountability and transparency.

I hope too that this will be a word to the wise as our citizens are becoming more aware of their rights  and are less fearful of enforcing them. Our Courts are becoming more innovative in creating effective  remedies for public wrongs. It behoves therefore those who seek positions on public boards to think  carefully of their legal responsibilities and potential financial liabilities in taking such positions.