Corporate Governance and GBTI

Jun 21, 2018 Letters

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Dear Editor,
Corporate Governance refers to the system by which companies are directed and controlled (Cadbury, 1992) – that is, “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled in corporations.”
Corporate governance influences how the objectives of the company are set and achieved and how risk is monitored and assessed, and how performance is optimized. More importantly, effective corporate governance relies to some extent on compliance with laws, but being fully compliant does not necessarily mean that a company has adopt sound corporate governance practices.
Principles of Corporate Governance – published by the Organization for Economic Co-operation and Development:
• Rights of shareholders: the corporate governance framework should protect shareholders and facilitate their rights in the company. Companies should generate investment returns for the risk capital put up by the shareholders.
• Equitable treatment of shareholders: all shareholders should be treated equitably (fairly), including those who constitute a minority, individuals and foreign shareholders. Shareholders should have redress when their rights are contravened or where an individual shareholder or group of shareholders is oppressed by the majority.
• Stakeholders: the corporate governance framework should recognize the legal rights of stakeholders and facilitate cooperation with them in order to create wealth, employment and sustainable enterprises.
• Disclosure and transparency: companies should make relevant, timely disclosures on matters affecting financial performance, management and ownership of the business.
• Board of Directors: the Board of Directors should set the direction of the company and monitor management in order that the company will achieve its objectives. The corporate governance frameworks should underpin the board’s accountability to the company and its members.
It is public knowledge that GBTI’s majority shareholder is the Beharry family, the owners of the Beharry Group of Companies thus qualifying them with controlling interest in the bank vi z-a-viz – sitting on the Board of that institution. Citing data from the annual report of the bank, the Beharrys own 61% of GBTI’s shares which they acquired over the years.
It should be noted as well that the bank has approximately 1800 shareholders which means that the remaining 39% minority shareholders are actually 1799 collectively – all of whom are at the mercy of a single group of shareholders who owned the majority shares.
Against this background, in the interest of strict corporate governance principles, who really is representing the 39% (1799) minority shareholders of GBTI that actually far outnumbered the majority shareholders? If one were to examine the composition of the Board of Directors, one would observe that the bank, unfortunately, does not have an independent board, not even a semi-independent board.
If you check the pages in the annual report, two of the directors are from the Beharry family, another is the CEO of an insurance company wholly owned by the Beharry family, the chairman is also closely affiliated to the Beharrys. Now, the Chairman, who approves loans for the bank, is also the lawyer of the said institution and represents the bank in the court of law – that is conflict of interest.
The Executive Director is also another employee of the Beharrys’ Group who is the Managing Director of the Guyana Americas Merchant Bank, which is one of their associate company. As far as the two other ‘so called’ independent directors are concerned, they are also ‘handpicked’ by the Beharrys such that, they were not appointed in a transparent and equitable manner through the AGM of the bank – which is how it is actually supposed to be since transparency is the corner stone of corporate governance.
While these practices may not be illegal per se – arguably, they are certainly not ethical and in compliance with stringent corporate governance protocols. From looking at the Official Gazette published by the courts, the owner of DIDCO who previously owned the KFC franchise in Guyana and would have lost that franchise, is/was a customer of the bank.
Any rational thinker who understands banking could therefore safely deduce with a very high degree of accuracy that the fact that the controlling/majority shareholders sit on the Board, are privy to all the internal information and business dealings of companies in this country and thus use it in their own private interest: thus, their acquisition of the KFC franchise in Guyana. These are practices that are not in keeping with the spirit of good corporate governance, especially for a major financial institution such as GBTI.
Then, there was the Larry Nath debacle, given that this story was widely covered in our local press, it begs the question, why would the controlling shareholders of the bank want to bring a discredited banker from another jurisdiction to head a major institution in Guyana?
As a matter of fact, there is an understanding and/or a speculation that Larry Nath is still running the bank behind the scene of things, as a consultant from Trinidad. Lastly, one has to ask the question why is it that almost every GBTI branch in this country, a branch of NAFICO/NALICO has to be there? Is this not an abused practice by the majority shareholders?
Editor, again, on behalf of the 39% minority shareholders which is some 1799 shareholders, the majority/controlling shareholders and the Board of Directors of GBTI need to be reminded and be cognizant that GBTI is not a wholly owned – private family company, it is a publicly traded company on the local stock exchange and hence it is subject to public scrutiny in the interest of financial stability and integrity of the institution; accountability, transparency and everything else by any independent analyst and or commentators alike and especially other key stakeholders.
Yours sincerely,
Banking & Economic Analyst
On behalf of the 39% minority shareholders of GBTI
(Name & Address Supplied)

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