Wednesday, February 21, 2018

In defence of First Citizens board

I wish to thank Mariano Browne for his insightful commentary which was published in the Express and other newspapers over the Easter weekend.

I now have a clear and proper appreciation of the factors which gave rise to the fallout surrounding the purchase of 659,588 shares by the former chief risk Officer of First Citizens.

I am now satisfied that there was no cap on the amount of shares which each employee could purchase, only a limit of how many shares could be purchased at a discount of 10 per cent. Employees could purchase up to 5,000 shares at $19.80 instead of the $22 price which members of the public were offered.

It is also now clear to me that many employees did not purchase shares, which resulted in almost half of the shares allocated to them collectively not being taken up. This failure to purchase appears to have been directly linked to the majority union’s call to employees not to purchase on the basis of the union’s well known objection to divestment of state assets.

The union has deprived some of its members of a unique opportunity to own a part of this iconic and profitable state enterprise and to create personal wealth for both themselves and their immediate families.

When National Flour Mills went public the union I now head embraced, under the astute leadership of Francis Mungroo, the purchase of shares by employees. The SWWTU put in place protections for employees by facilitating loans to purchase, restricting the sale of shares for a prolonged period (thereby avoiding speculation) and most importantly stipulated that shares purchased by employees would be offered back to other employees in preference to general shareholders. Why were these protective measures ignored?

I am at a loss to understand how the board of the bank is being blamed for what appears to be a “get rich scheme” quietly plotted elsewhere by persons intent on taking advantage of a flawed allocation process.

I have read the commentaries which speculate with regard to the involvement of the board, particularly Peter Permell’s views, and I can say, as a long serving board member in both the private and public sector, that he has gotten it very wrong.

What is being revealed are weaknesses in the allocation process and breaches of reporting and disclosure requirements by members of management. It cannot reasonably be argued that it was the board’s duty to monitor large trades. This surely is a key function of the corporate secretary who is the custodian of the share register.

Based on the media reports to date, there is no evidence to suggest that the corporate secretary brought any evidence of the purchase or sale of Mr Rahaman’s shares to the board’s attention.

In Mr Permell’s latest commentary he conveniently forgets that it was the state which sold its own shares to the market, under a policy devised by itself and resurrected from the NEL offering in 2001 but nonetheless urges the Minister of Finance and the Economy to send “the board home” together with the bank’s management. This cannot be right unless we fully understand the role of management, the board and the external parties concerned.

Who does Mr Permell suggest run the affairs and business of this very profitable state enterprise? Would such a move really benefit the bank in the short or long term, the shareholders he purports to represent, the employees and customers of the bank? The answers are clear.

I call upon the Minister of Finance and the Economy to explain to the national populace which body had real control of the First Citizens IPO process. It appears that the policies and processes were managed by a group of persons who were “handpicked” by the Minister.

The chairman of the bank seems to have been correct—there are legal issues at play not emotions and rhetoric and therefore it is best left to the regulators to unravel this affair.

Michael Annisette

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