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| Sunday, 9 February 2003 |
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Rebuilding public trust Biz Buzz by IRIS & AVED At a Ceylon Chamber of Commerce seminar on Rebuilding Public Trust, speaker after speaker questioned the effectiveness of the private sector and the practices on corporate governance, regulation and audit. The panel of speakers comprised Dr Wickrema Weerasooria, Chandra Jayaratne, Dr Dayanath Jayasuriya, Ariththa Wickremanayake and Sujeewa Mudalige. Jayaratne was most noteworthy in his comments on practices that must change if this country were to improve its competitiveness and develop its economy. His statements have opened the flood gates to a huge debate that is shaking the established private sector and reverberating at the national legislature. They merit closer review to answer the question: "is Chandra a Hero or Villain ...?" The private sector is not accountable for the investments it undertakes was the first charge. Is this wholly true of the private sector? There are time-tested practices that have been used by many companies with success. There are also many instances of those in charge of failed investments accepting the responsibility. The next charge - that businessmen are networked among themselves - is perhaps true not only in Sri Lanka, but of the rest of the world. Jayaratne himself is at the highest echelons of that network. The Rotary Club, the Ceylon Chamber of Commerce, the Golf Club or the Colombo Club will have more than 75 per cent of their membership and management committee in at least two, perhaps three of the four organisations. There are several other associations that swell the number on the inner circuit of business. Networking is in fact one principal object of such associations - the largest of which Jayaratne led admirably as Chairman of the Ceylon Chamber of Commerce. Networking helps people know what is happening in the business world, markets, business laws, economic policies, taxation and competitor activity. It helps people to get through to places, especially the phone of time conscious business leaders. In a way, networking adds to the efficiency of the system. What is wrong would be if networking results in cartels, award of contracts outside merit evaluation and large deals where huge gains are made by an individual or company without contributing to the economy. If networking extends to political patronage, it can be worse still. Needless to say that some of the negative aspects of networking are in plenty in the city. Is the private sector corrupt? A burning issue that has infuriated many business leaders at the top. There are more top level companies now than in the 1980s that have elevated their corporate governance and reporting to reasonable standards. The quality of financial reporting with adequate disclosures and in compliance with Accounting Standards is much better now than it was 10 years ago. The quality of audits has improved. Independent directors now serve on Boards. Audit committees have begun to operate. Yet, as Jayaratne stated, the level of compliance with good governance practices is far from satisfactory when the entire private sector is taken. There should be no mistake about that, but nobody would say that every person or business organisation in the private sector is corrupt. Media headlines are often worded to make news sensational and hence the strapline: "Business Community Corrupt". Transparency is one area Jayaratne was spot on. Many practices and transactions are not observing the transparency rules or the mind set needed to make them transparent. He was equally right when he said that the business community is risk averse, is not forward looking and lacks entrepreneurial skills. That does not mean that there are no well-run companies with world class management. Some models such as the MAS Group of the Amaleans are large. Some such as Eagle Insurance are subsidiaries of multinationals. Some others are relatively small, like the MAS Group was 12 years ago. While Jayaratne sounded combative, he referred to surveys on which he based his views and made some valuable suggestions. He asked the directors serving on Boards to devote adequate time to study the Board papers, come prepared for directors' meetings and to conduct meetings in an efficient and effective manner. He urged the private sector to change itself to assess and manage business risks, to adopt the Corporate Governance Code developed by the Institute of Chartered Accountants and comply with it effectively and focus on the corporate social responsibility. Jayaratne was passionate about his views and was indeed bellicose at the Ceylon Chamber of Commerce seminar. But what he said merits careful analysis. He should be persuaded by the private sector to make a more detailed report of his survey findings, present it to a group that volunteers to study and discuss it, and come up with an objective list of priorities for action. This could be a good project for the Ceylon Chamber of Commerce, now led by Tilak de Zoysa, to launch. |
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