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Fix the First Citizens account

By Keith Subero

So it seems that we have come full circle. It seems that Nyree Alfonso, chairman of First Citizens, was right after all: The First Citizens IPO scandal is a legal matter; it has little, or nothing to do with business ethics and the integrity of public officers.
Finance Minister Larry Howai last week presented the PricewaterhouseCoopers (PWC) report into the matter to the Cabinet, which referred it to the Attorney General, who has since decreed that the Finance Minister should have nothing more to say on the matter to avoid compromising its legal findings.
Senator Howai then advised media representatives: “You should perhaps speak to the Attorney General.”
I keep wondering whether Senator Howai, the Attorney General, in fact the Prime Minister’s entire Cabinet, are aware that they are facing a crisis of confidence—another aspect of the prevailing climate of public cynicism.
Someone among them needs to recognise that the First Citizens IPO matter is the latest, if not the worst, instance of the haemorrhaging of the reputational capital which the People’s Partnership Government took into office in May 2010.
It is the latest installment in the Government’s serial of daily mis-steps in its parade of scandals. There should be no need to remind Senator Howai that if he is not seen to be proactive and in control the damage to the struggling Stock Exchange and the overall financial system could be irretrievable.
To staunch that haemorrhage of public confidence in his Ministry, Senator Howai—not the Attorney General, I wish to advise—must be seen as undertaking bold decisions in this matter, and eventually oversee radical surgery on the financial system.
Let me make some suggestions:
—The Philip Rahaman share transaction has to be reversed, either through legal compliance or moral suasion. Senator Howai may choose to use of Home Mortgage Bank issue as a guide.
—The Minister must replace the First Citizens board chairman immediately.
—If the PWC investigation points to any malfeasance in the purchase of shares from the under-subscribed employee pool, the Minister should impose a least a five-year “lockdown” on their sale.
—He should confront publicly reports of wider transactions involving insider trading.
—The reasons it took the CEO of the Stock Exchange, the monitoring body, and not First Citizens, some four months to have the matter of Philip Rahaman’s transaction reported must be questioned further.
—That same moral suasion should be used to support the Securities & Exchange Commission’s call for Senator Subhas Ramkhelawan to be replaced as chairman of the Stock Exchange.
—It should be used again to ensure that the Stock Exchange board, to be elected next month, comprises mainly independent members. No longer should it be stacked by stockbrokers, who supposedly regulate themselves.
Senator Howai is an experienced banker who left First Citizens with a noteworthy performance record. And at this point he may choose to reflect deeply on the institution.
Again, I would like to suggest some points:
—What is the most valuable part of First Citizens?
—What is it that the bank cannot afford to lose?
—The bank’s physical assets are safe but what of its intangible assets, the First Citizens brand, and its
corporate credibility?
—If he does not manage this crisis, can it lead to a “reputational bankruptcy”—a situation where nobody trusts First Citizens anymore?

Under Mr Howai’s stewardship First Citizens by all accounts operated ethically, maybe thanks in part to the monitoring of successive ministers of finance and the Central Bank. But First Citizens’ management cultivated and protected the brand. Through such ethical behaviour it gained a competitive edge in the market and today it is regarded as being among our most successful indigenous entities.
There are public relations-engineered corporate quick fixes that attempt to turn brand image into responsible corporate citizenship, but in the financial world trust is everything.
In business it is said that a company’s good reputation creates an intangible barrier which competitors stumble to get over, and this is what First Citizens built.
Until now, First Citizens embodied what is called the Business Integrity Thesis which, in brief, equates profits with corporate social responsibility.
But First Citizens’ true ethical nature was not recognised in chairman Alfonso’s recent defence of the Rahaman deal. She chose to limit the issue to legal compliance.
With the matter now in the hands of the Attorney General, it may become just another legal one—but the court of public opinion will consider instead the questions of First Citizens’ corporate integrity and its credibility.


—Keith Subero, a former Express news editor, has since followed a career in communication and management.
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