Confidence in First Citizens would have been raised, if not entirely restored, following the removal of four board members at Monday’s annual general meeting.
It is a pity, however, that the individuals involved decided to remain in their posts until forced out by the Corporation Sole. Having fired the Chief Risk Officer Philip Rahaman, whose $12 million profit from the bank’s Initial Public Offering (IPO) caused significant public disquiet, the board had managed to curtail some of the negative fallout. However, chairman Nyree Alfonso then persisted in defending her board on specious grounds.
Ms Alfonso’s rationale was that the bank’s board was not directly involved in the IPO arrangements which had facilitated the furore. The weakness of this argument is that at least one board member did sit on the Divestment Secretariat and that Ms Alfonso did claim at one point that no regulations were breached and she could not use “morals and ethics” to determine wrong-doing.
Ms Alfonso now claims that her words were misconstrued by the reporter. To deal with the lesser point first, the question of banking ethics, not Ms Alfonso’s or anyone else’s, did apply. Even if Mr Rahaman broke no laws, professional ethics should have prevented him profiting from any loopholes in the IPO—after all, who better than he would have known that such an action would place the bank’s reputation at risk?
But the larger point is that if, at that time, the board had insufficient knowledge of what had transpired, then Ms Alfonso should not have been defending Mr Rahaman at all. And then, having presided over his dismissal, she yet managed to rationalise that she herself could stay on as chairman—hence proving that her grasp of professional ethics was indeed inadequate to judge Mr Rahaman.
In excusing the board’s lack of oversight, Ms Alfonso in an interview on i95.5 FM last week also argued that the board could only know what managers told them, and that no warning had been raised in respect of Mr Rahaman’s multi-million-dollar share purchase. If this is so, it constitutes either a major dereliction of duty or at least incompetence on the part of management. And, since Finance Minister Larry Howai was at pains to emphasise that the dismissal of the four board members in no way imputed wrong-doing, then incompetence or the need to preserve the bank’s hitherto untarnished brand are the only defensible reasons for firing them.
The same rationale should therefore also apply to the responsible executive managers, who must also be held accountable to fully restore public confidence in First Citizens.