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Board Games (Part Two): Afra Raymond continues look into State boards

Part One of my look into State boards prompted a series of extremely interesting responses, so I will continue this examination of the State Controlled Agencies. This term includes State-owned Enterprises (SoEs) such as UDECOTT, Caribbean Airlines and Education Facilities Company Limited (EFCL), as well as Statutory Agencies like WASA, TTEC, CDA, PATT and HDC.

Photo: A Caribbean Airlines plane prepares to land. (Copyright Lyndon Thorley/Planespotters.net)
Photo: A Caribbean Airlines plane prepares to land.
(Copyright Lyndon Thorley/Planespotters.net)

Some sharp objections were made to my comparison of the relation of State, Government and citizens to that of a Company, its Board of Directors and its shareholders.

I maintain that this is a valid comparison for us to reflect on the proper roles and responsibilities of the various public officials, but perhaps more importantly, the responsibilities of us as citizens.

This is a longer extract from S.99 of the Companies Act, which specifies:

(Duty of Directors and Officers)

99.(1) Every director and officer of a company shall in exercising his powers and discharging his duties:

(a) act honestly and in good faith with a view to the best interests of the company; and

(b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.

(2) In determining what are the best interests of a company, a director shall have regard to the interests of the company’s employees in general as well as to the interests of its shareholders.

(3) The duty imposed by subsection (2) on the directors of a company is owed by them to the company alone; and the duty is enforceable in the same way as any other fiduciary duty owed to a company by its directors.

Photo: Tourism minister Shamfa Cudjoe (front centre) and the TDC board pose for a photograph on 12 November 2015. The members are (front row: left to right) chairman Dennise Demming, Frederica Brooks-Adams, (back row: left to right) Davlin Thomas, Eric Taylor, Tonya Laing, Sherry Katwaroo-Ragbir and Dennis Sammy. Missing is Richard Duncan.
Photo: Tourism minister Shamfa Cudjoe (front centre) and the TDC board pose for a photograph on 12 November 2015.
The members are (front row: left to right) chairman Dennise Demming, Frederica Brooks-Adams, (back row: left to right) Davlin Thomas, Eric Taylor, Tonya Laing, Sherry Katwaroo-Ragbir and Dennis Sammy.
Missing is Richard Duncan.

The Directors’ and Officers’ duties clearly lie with the Company and at sub-section (3) we are told that this is their sole responsibility. The Directors and Officers owe the Company a duty of care to safeguard and enhance its interests.

This seems to mean, working with this comparison, that the State and its wellbeing ought to be the sole concern of the Government.

The Company can take action against its Directors, which is the avenue used by the previous administration to sue the Directors of UTT, eTeck and Petrotrin.

The shares in SoEs are held by the Corporation Sole, which is a part of the Ministry of Finance. The SoEs and the Statutory Agencies act on behalf of the Ministry for which they implement the respective public policy; that is called the “Line Ministry.”

So, HDC and UDECOTT are under the Ministry of Housing and Urban Development, while TSTT, TTEC and WASA operate under the remit of the Ministry of Public Utilities.

Photo: Minister of Housing and Urban Development Randall Mitchell. (Courtesy IRCP.Gov)
Photo: Minister of Housing and Urban Development Randall Mitchell.
(Courtesy IRCP.Gov)

Although the Corporation Sole is the shareholder in the SoEs, we are the true owners, the citizens. We are the Ultimate Beneficial Owners of the SoEs and the entire State.

All of which takes us to the important question of the extent to which our present arrangements for these Board appointments resemble the best-practice as obtains in successful private-sector companies.

Can we as a people summon the will and the wits to move to an arrangement in which these Boards of State Controlled Agencies can be comprised of independent or bipartisan Directors?

That would be a serious re-constitution of our present unstable arrangements.

To go further, to what extent, if any, do Ministers have the right to give instructions to the Board of Directors of State Controlled Agencies? One could hold the view that as the State owns and controls its agencies, it is entitled to direct them to execute its policies.

Many people hold such views, but just what instructions are legitimate ones? Can the State, which controls these agencies, be a mere creature of the Government?

Photo: This sidebar shows the change in leadership at TDC during a seven year period. (Courtesy Afra Raymond)
Photo: This sidebar shows the change in leadership at TDC during a seven year period.
(Courtesy Afra Raymond)

It may be proper to give general directions, but what about specific directions? Where is the true dividing line between those types of directions?

More importantly, in terms of good standards of corporate governance, if the Government is within its rights to give both general and specific direction to SoEs, then what is the purpose of those Boards of Directors?

Are they installed as a convenient buffer or firewall to shield the political directorate from blame when things go wrong?

This is a serious area of dispute which was a leading source of argument in both the Bernard Enquiry into the Piarco Airport Project and the Uff Enquiry into the Public Sector Construction Industry.

This was the main dispute between then Planning and Development Minister, Dr Keith Rowley, and the then UDECOTT Chairman, Calder Hart, in relation to the tendering for the Customs and Excise Building.

Despite extensive testimony and argument on the point, the Uff Report made no final decision, other than to tell us to “make up our minds.”

Photo: Former Trinidad and Tobago Prime Minister Patrick Manning attends a news conference at the venue of the Commonwealth Summit in Port-of-Spain on 26 November 2009. The UDECOTT scandal contributed to the fall of the Manning-led Government. (Copyright REUTERS/Jorge Silva)
Photo: Former Trinidad and Tobago Prime Minister Patrick Manning attends a news conference at the venue of the Commonwealth Summit in Port-of-Spain on 26 November 2009.
The UDECOTT scandal contributed to the fall of the Manning-led Government.
(Copyright REUTERS/Jorge Silva)

This is the 54th recommendation of the Uff Report:

54. There should be no doubt (as there presently is) as to the power of Ministers to give instructions to Government agency companies on any matter within the Minister’s remit, including compliance with rules, regulations and procedures. If this cannot be achieved by voluntary means, consideration should be given to creating the agency as a statutory corporation incorporating such powers… (Pg 310)

The Statutory Agencies are created by an Act of Parliament, which can contain specific provisions. For instance, the HDC is a statutory corporation and under the HDC Act. The powers of the Minister are specified at S.12 as:

12. The Minister may give to the Board directions in writing of a specific or general nature to be followed in the performance of its functions or the exercise of its powers under this Act, with which the Board shall comply.

That means that the Line Minister has the power to order the HDC to perform specific tasks and the HDC has to comply with those directions.

Photo: The Fidelis Heights HDC compound. (Copyright Trinidad Guardian)
Photo: The Fidelis Heights HDC compound.
(Copyright Trinidad Guardian)

Finally, moving past the critical issues of Board appointments and directions, there is the wider consideration as to governance standards. It would be impossible to operate a large company properly without accounts or contracts in place, yet that is occurring in our State Controlled Agencies.

In the case of accounts, consider this extract from Parliament’s Public Accounts Enterprises Committee (PAEC) Report of 18 February 2013, at para 4.1 on page 12:

Non-receipt of up-to-date audited financial statements by State Enterprises: At present, the non-submission of up-to-date audited financial statements continues to be the most severe impediment to your Committee in being able to effectively execute its Constitutional mandate.

In February 2011, your Committee wrote to the Heads of all State Enterprises by circular letter, asking that their respective audited reports be updated and submitted to the Parliament as a matter of urgency. Your Committee received responses from less than 10% of the number of State Enterprises on file…

This PAEC, which was chaired by Fitzgerald Hinds, met during 2011 to examine CAL’s 2008 audited accounts. In addition, many of the State-controlled agencies carry out projects without formal, signed contracts.

Photo: This sidebar shows the scale of State Owned Enterprises in 2011. (Courtesy Afra Raymond)
Photo: This sidebar shows the scale of State Owned Enterprises in 2011.
(Courtesy Afra Raymond)

For example, the Uff Report provides these details:

The absence of a written contract was put in context in the cross-examination of Minister Emily Dick-Forde when she confirmed advice from HDC to the effect that none of their large projects and none of the small projects either had a signed contract.

It was subsequently confirmed that as at January 2009 HDC had 64 large projects ongoing and 591 small projects, none of which had a signed contract. Large projects were those over $50m in value… (paragraph 25.30)

There are a serious series of issues to be resolved within our State-controlled agencies.

AboutAfra Raymond

Afra Raymond is a Chartered Surveyor and Managing Director of Raymond & Pierre Ltd. He is the ex-president of Institute of Surveyors and immediate past president of the Joint Consultative Council for the Construction Industry (JCC), having served between December 2010 and November 2015.

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26 comments

  1. Afra Lasana
    Possible arrests stemming from the controversial Life Sport programme can soon materalise following a completed audit.

    So said Attorney General Faris Al-Rawi, who was fielding questions from members of the media after speaking at a privacy and law enforcement forum at the University of the West Indies, St Augustine, yesterday.

    He said the First Citizens’ ILO audit is also completed and that would also engage the attention of relevant officials to determine the next course of action.

    “As a result of audits performed in the government sector and institutions, information has come forward and due process has to be followed and that will happen by those who have the responsibility to do that. You will hear about that quite soon,” Al-Rawi added.

    Pressed on whether that included the laying of charges, he maintained that due process must be followed, adding it would be up to the police to decide.

    “The matter is in train… there are many bits of consideration over these issues, some are civil, some are criminal, some are in other camps. Some are in the Government’s camp.

    “The Government could never intrude upon the work of independent entities. We are not the Police Service and we are not the DPP. We are enablers of certain things,” Al-Rawi added.

    On the effectiveness of the Interception of the Communication Bill, he said that piece of legislation led to a breakthrough in the Dana Seetahal murder probe.

    But Dean of the Law Faculty, Rose-Marie Antoine, expressed concern over the authorities having access to interception without a warrant.

    She added that greatly worried her.

    Al-Rawi said there was a lot of confusion regarding the SSA Amendment Bill and the Interception of Communication Bill.

    “It seems as if many people had just woken up from a deep sleep for the last five years,” Al- Rawi said, adding that the Act was passed in 2010.

    He said areas of the Act must be carefully followed to obtain evidence, otherwise it could be deemed null and void.

    ‘Right to privacy must be ensured

    Deryck Murray, chairman of the T&T Transparency Institute, said: “Corruption thrived in a veil of secrecy” adding that very often secrecy and privacy were often intertwined.

    Saying it was, therefore, up to civil society to ensure there was a balance between information being readily available and the work of law enforcement officers, Murray said the right to privacy must be ensured, especially to those who were not the perpetrators.

    Regarding the issue of trust he said oftentimes members of the public questioned whether the judicial process was fair and above board.

    He added that T&T ranked 39 on the current corruption index.

    He asked: “Do we just want laws on the books? We the people who form civil society need to make our voices heard. We need to see implementation.”

    Commenting on 14 people being killed over the last weekend Murray said it had come to a point where murdering someone was now the answer if somebody got vex with someone.
    Geisha Kowlessar, Guardian
    Published:
    Wednesday, May 18, 2016

  2. From what I can remember, that LifeSport audit was completed and published. ..it was an internal report hosted on the Finance Ministry website…

  3. Eight months and not a peep from the current Sport Minister or SPORTT board on LifeSport btw. How long does it take to do an audit?!

  4. What do you make of all of this Kendall Tull?

    • The company exists to enforce the government’s policies. In that regard, the Minister instructs the Board to execute the mandate they are given.

      Problems arise when Ministers and Boards interfere within the company as to how the policies should be executed. No Minister can issue an illegal instruction to a Board who are still bound by the Companies Act.

      Similarly, no Board member can issue an illegal instruction to an employee of the company. You have to have the fortitude to stand for the right thing despite the personal cost. That’s probably why I have never been asked to serve on a public sector board. Lol

    • I am writing on this point of illegal instructions as the next essay…it will be detailed…

  5. Yeah. As a board member, imagine I could specifically be told to make Life Sport happen for instance. Scary. I’d walk immediately.

    • Yes, me too but the legislative process is what concerns me. They know why they chose to use the word ‘specific’

    • Afra, so State boards are set up to do the bidding of the ruling party with only a pretence of a degree of sovereignty?
      Even if one of the people that the Minister handpicks has some independent thought about him, there it is in black and white like Savitri pointed out.

    • You cannot issue an instruction to break the law or to act contrary to a Director’s fiduciary responsibilities. I would not accept instructions to bypass proper procurement processes by successive administrations. Of course I was sent packing at their earliest opportunity as a result but I stand by my statement.

  6. Lasana I was referring to this para in Afra’s article “The Statutory Agencies are created by an Act of Parliament, which can contain specific provisions. For instance, the HDC is a statutory corporation and under the HDC Act. The powers of the Minister are specified at S.12 as:

    12. The Minister may give to the Board directions in writing of a specific or general nature to be followed in the performance of its functions or the exercise of its powers under this Act, with which the Board shall comply.”

  7. Makes one wonder if this nonsense happens while most of the senior politicians were in parliament, if this is a conscious decision as in the case of HDC, where the Minister can issue specific instructions, and I’m sure its happening elsewhere.

  8. SOEs originated in the late sixties eventually adopted as formal, documented policy in the early seventies. The era of psychologically-induced revolt against a sensitively perceived neo-colonialism. It was also the era, as now, when little was known about the dynamics of private sector management, except that it was generally successful and paid high salaries. Anybody with brains could do that. It was also the era of the new practice of formal management theory, organisational dynamics and the initiation of the first, very small batch of University-educated managers. That era was dominated by company directors who were esteemed men of high integrity, practical intelligence and vast experience either in the public or private sector. All were great mentors. Sowed in fertile ground, the SOE’s performed their functions. No one knew how to care for them. Weeds appeared and morphed the plants which in the lush manure of money, corrupted into wild flowers with barren fruit that absorbed money as life depended on it. Clear the jungle and start a new crop. We are in a new era where none of the past is relevant except high integrity, practical intelligence and vast experience among good men and women who un-willingly agree to serve as directors