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.
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.
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.
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?
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.”
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.
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.
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.