Corporate Governance in Guyana (Caribbean)

Marlon George Robinson

Corporate Management Research paper

Professor: Christopher Ram – UG Law Dept.

9th March, 2015

1

“The road to a Corporate Governance Code in Guyana has beenlittered with Potholes.”

The above will be discussed with the authority of the

Companies Act of Guyana commencement order #25 of 1995;

hereinafter referred to as the CA. Other academic reports and

articles will be used. This paper will also look at a several

cases pertinent to the matter and Corporate Governance Codes

of other jurisdictions.

“The failure of financial institutions globally has drawn increasing attention to the

need for sound management of financial assets and proper stewardship of the

institutions.” Lawrence T. Williams – Governor – Bank of Guyana

1 Image on front page was taken from: Ooredoo - Corporate Governancewww.ooredoo.qa

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Main Topics to discuss:

1. Introduction – Approach to Corporate Governance inGuyana……...........……..Page 2

2. What is CorporateGovernance?.............................................................................Page 5

3. Deciphering the JURISPRUDENCE & PHILOSOPHY of Corporate

Governance in Guyana – also looking at Belize –

(establishing that the State has a moral obligation…………..

……………………………………….……………………Page 6

4. What is a fiduciary

duty?....................................................

..................................Page 9

5. The Companies Act of Guyana: laying down the Fiduciary

Duties as an element of Corporate Governance

………………………………………………………….Page 11

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6. Guyana Securities Council2 - a fanciful weak force.

……………………………Page 15

7. UK Corporate Governance Code Cadbury Report)…………………….……Page 20

8. Conclusion: …………….………………………………………………………Page 23

9. Bibliography……………………………………...…………………………….Page 24

1. Introduction – Approach to Corporate Governance in Guyana

In discussing the ‘potholed road to corporate governance in

Guyana’, I find it important to start by quoting Academic–

Christopher Ram – I believe he puts the matter into

perspective as he states: “Developments in Guyana have progressed far

more slowly and some very fundamental issues remain to be addressed. …

influenced by an event abroad which touches directly on an ongoing issue in

Guyana – that of having the role of the chairman of the board and the company’s

CEO being performed by the same person. But the search for an appropriate

corporate governance model for Guyana is bigger and wider than this. There is no

one-size-fits-all solution. The search has to be informed by and takes account of the

2 Ministry of Finance – Guyana; found at: http://www.finance.gov.gy/about-us/agencies

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social context and legal framework of the country.” This profound state by

Mr. Ram moved me to look beyond the lack of a Corporate

Governance Code for Guyana.

When he stated that the search has to be informed by and [has

to take]3 account of the social context and legal framework of

the country; it moved me to include in this paper, an attempt

to decipher the JURISPRUDENCE & PHILOSOPHY of Corporate

Governance in Guyana. By this – among other resource

materials – I was taken to find official and unofficial cases

of corruption in Guyana (the CLICO case is evident of corruption outside

Guyana as well.) What I discovered truly convinces me that –

(The state has a moral obligation in CIVIL LAW to enforce

policies and prosecute wrong doers in CORPORATE BUSINESS.

And, for the lack of such, it remains true that “The road to a

Corporate Governance Code in Guyana has been littered with

Potholes”.

Before; continuing into the context of this paper; I feel the

need to jump straight into the astronomical effect – the lack

of Corporate Governance can have on companies and States. I

want to spur the interest of my reader to ponder on what may

be happening in Guyana in the absence of a Corporate

Governance Code; by introducing the Polly Peck’s International

(PPI) case: The prosecution (Serious Fraud Office4 – SFO)

3 This insertion, is a direct ascription from Mr. Ram’s posit. 4 The Serious Fraud Office is an independent government department, operating under the superintendence of the Attorney General.  Its purpose is to protect society by investigating and, if appropriate, prosecuting those who commit serious or complex fraud, bribery and corruption and pursuing them and others for the proceeds of their crime.  It operates in line with its statutory purpose and policies.  Its Director is David Green CB QC.

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charged that Asil Nadir stole over 150 M £ the equivalence of

46,737,251,550.005 Guyana Dollars.

The BBC6 News reported that: The Serious Fraud Office originally began

investigating Nadir and found evidence that he had stolen millions of pounds

from PPI that belonged to its shareholders. Nadir exercised an extremely

high level of control over PPI's finances. He had the power to move money

without requiring a counter-signature from another director.

After reading this case; I asked myself - could this be

happening in Guyana; could shareholders be losing Billions of

GD, for the lack of a Corporate Governance Code or for the

lack of enforcement of whatever policies already exist. But,

just close to Guyana an example of this level of corruption leading to the loss

of millions of Shareholders money – is the Trinidadian Colonial Life Insurance

Company (CLICO) case in 2009. When CLICO had announced its millions in losses –

it sent seismic shock waves from Trinidad to Guyana, Belize and all over the

Caribbean.7 Cases of this magnitude causes concern whether the perfect storm is

not brewing in Guyana for the lack of a Corporate Governance Code.

5 Conversion was taken from a web currency converter, found at: https://www.google.gy/?gws_rd=cr,ssl&ei=Rjz8VJfAOoSRyQTjpoEQ#q=convert+150M+pounds+to+Guyana+Dollars6 British Broadcasting Corporation 7 barbadosfreepress.wordpress.com

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2. WHAT IS CORPORATE GOVERNANCE?

I opted to accept the following definition because it is both

succinct and yet all inclusive: Corporate governance refers to the

set of systems, principles and processes by which a company is governed. They

provide the guidelines as to how the company can be directed or controlled such it

can fulfil its goals and objectives in a manner that adds to the value of the company

and is also beneficial for all stakeholders in the long term. Stakeholders in this case

would include everyone ranging from the board of directors, management,

shareholders to customer, employees and society. The management of the company

hence assumes the role of a trustee for all the others.8 The Bank of Guyana in

their Director’s Hand Book has laid down a similar definition.9

I decipher that the above definition screams out FIDUCUARY

DUTIES and HOLDING THEM ACCOUNTABLE! Many directors go

outside the ambit of their fiduciary duties in search of ways

to making more money – even to the point of GREED – and taking8 Thomson, Lisa Mary, ET Bureau January 18th, 2009. [What is Corporate Governance?] Found at: http://articles.economictimes.indiatimes.com/2009-01-18/news/28462497_1_corporate-governance-styam-books-fraud-by-satyam-founder9 Bank of Guyana – Director’s Handbook, found at: http://www.bankofguyana.org.gy/Documents/Full%20book.pdf

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extremely higher risk. When shareholders hear of greater

dividends they believe that there is nothing to be worried

about, when, quite ironically, it is a time for great concern.

In deriving at a suitable and enforceable Corporate Governance

Code for Guyana, we must realize that there is a

jurisprudential and philosophical difference in Criminal Law

and Civil law.10

3. Deciphering the JURISPRUDENCE & PHILOSOPHY of Corporate

Governance in Guyana – (The state has a moral obligation

in CIVIL LAW to enforce policies and prosecute wrong doers

in CORPORATE BUSINESS).

In trying to understand the above topic – I looked beyond

Guyana to my native shores of Belize. Although Belize

assisted the Federal Bureau of Investigation FBI to bust a US

Billion dollar Ponzi scheme, I believe it might have been left

alone if the FBI did not sound the alarm.

10 Coleman Jules and Shapiro Scott, [The Oxford Handbook of JURISPRUDENCE & PHILOSOPHY OF LAW] Oxford University Press (Oxford New York) 2011

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The FBI and the Belize Police Department, in

collaboration with the financial authorities of Belize

conducted a joint operation on the majestic high-rise

Matalon and Gordon building of offshore investment firms.

The US Attorney’s office for the Eastern District of New

York issued a statement on Tuesday Sep. 9 2014 alleging

that three brokerage firms were created in Belize to help

US citizens in fraudulent manipulation schemes of

publicly traded companies. The International Financial

Services Commission of Belize also issued notice to Titan

Legacy and Unicorn that it would also take action. Three

of the Ponzi scheme companies were licensed by the Belize

Commission and the Commission acted swiftly announcing a

suspension or revocation of their licenses. According to

the second indictment Bandfield, Godfrey and IPC a

limited liability company Bandfield organized under the

laws of Nevis in the West Indies and used Belize as their

base. It is said that their clients paid them

substantial fees to establish a pyramid of limited

liability companies (LLCs) and international business

companies organized under the laws of Nevis and Belize.11

That is to say that the very same operations could be

happening here in Guyana or that Guyana should be quick to

adopt an enforceable Corporate Governance Code to avoid the

same from happening. These Ponzi Schemes hurt Shareholders

and Government revenue collection. But, under the

jurisprudence and philosophy of law, society has taken two11 Adele Ramos, Amandala News. [FBI bust Billion dollar offshore safe haven]12 Sept. 2014

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different approaches to justice. We have CIVIL LAW and

CRIMINAL LAW. In chapter 9 page 352, of The Oxford’s Handbook

of Jurisprudence & Philosophy of Law, Jeremy Waldron12 states:

“Might legal philosophy be conceived as a branch of political

philosophy? There is evidently some connection between them…

The legal system is part of the political system… Laws and

their enforcement, constitutions, legislatures, courts,

adjudication, legal reasoning, the rule of law, and so on –

these are respectable subjects of political inquiry.”

In his academic article THE TRIANGULARITY OF PRIVATE RIGTS OF

ACTION13 – Benjamin Zipursky14 states: A private right of action

involves a triangle of relationships. A plaintiff has a claim

against the state to its assistance in changing the legal

relations of the defendant. Note that the claim for

affirmative assistance from the state is a claim aimed at

generating an ability to act against the defendant (by

altering its legal status). The state has a moral obligation

in CIVIL LAW to enforce policies and prosecute wrong doers in

CORPORATE BUSINESS. Zipursky emphatically states that:

Ironically, the recapture of private law begins with the recognition that the state is

essentially involved in private adjudication, but it purports to take a distinctive type

of role. Private law is essentially driven by private rights of action. This means that

the fundamental decisions made by the state are decisions about empowerment and

privilege.

12 Jeremy Waldron, [Published Essay – LEGAL AND POLITICAL PHILOSOPHY] Waldron is a Professor of Law, and Director of the Center of Law and Philosophy, at Columbia University. 13 Coleman Jules and Shapiro Scott, [The Oxford Handbook of JURISPRUDENCE & PHILOSOPHY OF LAW] Oxford University Press (Oxford New York) 201114 Benjamin C. Zipursky, Associate Dean of Academic Affairs and Professor atFordham University School of Law.

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In other words; the STATE OF GUYANA must have the will power

and exercise private adjudication in order to set the example

to Corporate Governance. In this respect I cannot help but to

mention the UKs’ ‘Serious Fraud Office’; this an independent

government department. Could we not adopt a system like that

of the UKs’ SFO or could the Public Sector Commission hold

true to their second listed core value “respect all shareholder15” – I

respectfully submit that this should mean to safeguard all shareholders, their

interest. I go further to say that there may be enough

provisions in the CA., other subsidiary legislations and

proposed Corporate Governance Code, that could seriously

improve Corporate Governance in Guyana.

I am convinced that the potholes, in the road to a Corporate

Governance Code, is the lack of political will by politicians

in Guyana to enforce the existent provisions.

In Guyana it is evident, like around the world: the

state/government/society, does not condone stealing. A man is

not allowed to pick up a bag of money laying in an open bank

vault, it does not belong to him and the response will be

swift and harsh. But, corporate law and corporate

institutions are a beast of a different colour, most

politicians and those in corporate business are intertwined –

sharing power and interest16. Legal protective polices and

15 Guyana’s Private Sector Commission – CORE VALUES #2 Respect all Shareholders. This can be found at: http://psc.org.gy/about/#intro16 In Guyana – it was wide common knowledge – and frequently reported on themedia, and queried by the opposition in parliament, of the involvement of Government officials of the PPP political party, involvement of the Marriott Hotel, Sun and Sands, Surendra Engineering, Bai Shailin Company, and the expansion of the CJIA. And the AG misusing government funds. It isbelieved that the President does nothing – no political will to do what is

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enforcements and punishment take on a different sphere than

the strict criminal law response to stealing and pilfering.

It is also evident that there is something fundamentally wrong

in Guyana – although people in power and wealth don’t want to

go to jail and there is corruption everywhere – Guyana tips

the scale. In 2013 Guyana scored 27 out of 100 points making

it the most corrupt – English speaking, Commonwealth Caribbean

Country. In December 3, of 2014; it was reported that:

“While its ranking moved slightly in a positive direction, Guyana is still listed in the

very corrupt category in the Transparency International Corruption Perceptions

Index… Guyana remains far behind its Caricom peers placing 124 th out of 175

countries.”17 The report continued to say that, the JAGDEO AND

RAMOTAR ADMINISTRATIONS have been beset by concerns over

rampant corruption and the country’s ranking on the TICPI’s

index. Barbados, in stanch contrast to Guyana, scored 74

points out of 100 and ranked 17th. In my respectful opinion,

if law enforcement is NOT pursued in Guyana’s corporate world;

it allows for politician to have a free pass to milk the

country dry to its demise. Politicians set up companies or

buy into the share capital of other companies and out-rightly

plunder the nations’ wealth, without recourse and without

remorse18.

right (just to mention a few). 17 StabroekNews.com, [Guyana still in very corrupt category of Transparency International Index] December 3, 2014 – by STABROEK EDITOR 18 This assertion is deduced from: Harris, Robert – [Political Corruption: In beyond The Nation State] Routledge Amazon, NY, Canada and London 2003Harris states: “Political corruption is a topic of relevance to us all. Whether the politicianconcerned is a corrupt individual in an honest system or simply acting normally in a political systemwhere nearly everyone is corrupt, it is vital to grasp the nature of the corruption and how the systemdeals with it or – as is often the case, fails to deal with it.”

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When a wealthy nation like Guyana is haemorrhaging from its

national resources; then there is little funds to pay public

servants, AND teachers and provide for infrastructure and

social welfare. Law enforcement officers [may be] forced to

take bribes and turn a blind eye to crimes and offences in

order to supplement their salaries; and a country as beautiful

and wealthy like Guyana, would spiral into a failed state.

4. What is a Fiduciary Duty?

The fiduciary duty of directors to the company originated in

the common law and is a duty to act in the best interest of

the company19. It is a broad, contextual concept and it is a

duty owed to the company: Percival v Wright20. Ms. Leslie

Walcott21 also places emphasis that promoters22 stand in a19 Sealy Len, Worthington Sarah, Sealy’s Cases and Materials in Company Law,OXFORD Published in the United States by Oxford University Press Inc., NewYork. 201020 [1902] 2 Ch. 421 (Ch.) The matter did fail as stated by SWINFEN EADY J:“There is no question of unfair dealing in this case. The directors didnot approach the shareholders with the view of obtaining their shares. Theshareholders approached the directors and named the price at which theywere desirous of selling the plaintiffs’ case wholly fails, and must bedismissed with cost. 21 Leslie A. Walcott – Senior Lecturer LL.M., (London) Attorney-at-Law. MsWalcott has conducted extensive research on the legal framework of theCommonwealth Caribbean with respect to company law, corporate governance,tax and insurance law. 22 In Tengku Abdullah v Mohd Latiff bin Shah Mohd, [1996] 2 MLJ 265 GopalSri Ram JCA said: "A promoter is one who starts off a venture-any venture-not solely for himself, but for others, but of whom, he may be one."However the most cited case in this regard is Twycross v Grant where CJ

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fiduciary relationship to the company. Walcott points out the

case of Erlanger v. New Sombrero Phosphates & Co.23, which was

the first decision to recognise the existence of a fiduciary

relationship. Lord Blackburn commented on the extensive,

almost unlimited powers which promoters have. Lord Blackburn

indicated that such powers must be checked by an objective

test of reasonable use.

1. A promoter must not make any secret profit out of the

promotion of the company without the company’s consent.

2. A promoter is under a duty to disclose any interest in

which he may have in a venture in which he has entered into.

3. A contract entered into between the promoters of the

company is voidable at the instance of the company unless all

material facts have been disclosed to a full and independent

board.

If the company is a public company then full disclosure in the

prospectus is sufficient. In the House of Lords decision in

the case of Erlanger v. New Sombrero Phosphates & Co., as well

as Gluckstein v. Barnes a syndicate purchased property and

resold it to the company. The syndicate only disclosed a

portion of the profits. The House of Lords decided they were

accountable for the remainder. Duties of care, diligence and

skill a more modern approach has since developed, and in

Cockburn said,”One who undertakes to form a company with reference to agiven subject and to set it going and who takes all the necessary steps toaccomplish that purpose.' The promoter lays the foundations for a Companyin terms of negotiations, registration of the Company, obtaining directorsand shareholders and preparing all the paperwork.23 HL 1878

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Dorchester Finance Co v Stebbing24 the court held that the rule

in Equitable Fire related only to skill, and not to diligence.

With respect to diligence, what was required was: "such care

as an ordinary man might be expected to take on his own

behalf." – This seems to be an objective test deliberately

pitched at a higher level.

24 [1989] BCLC 498

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5. The Companies Act of Guyana: laying down the Fiduciary

Duties as an element of Corporate Governance.

Firstly; the Companies Act of Guyana has its roots from our

inherited English legal system. Company Law in British Guyana

was under (Ordinance of 1846) and continued – with some

adaptation and modifications to be the companies act cap.

89:01 and later repealed by the Companies Act of 1991 known as

the Companies Act. Alongside the CA. it is pertinent to state

the “indoor management rule”.

This principle, was authoritatively laid down in the 19th century case of Royal

British Bank v Turquand. It was eventually codified in Section 19 of the

Ontario Business Corporations Act and Section 18 of the Canada Business

Corporations Act.25 Turquand served to qualify the harsh implications of the

'constructive notice' doctrine, under which all persons conducting business

with a corporation were deemed (or construed) to have knowledge of any

restriction on the authority of an agent contained in the corporation's articles

and by-laws.26

The rule in Turquand's case was endorsed by the House of Lords

in Mahony v East Holyford Mining Co.27 According to Lord Hatherley:

"[The articles and by-laws of a corporation] are open to all who are minded to

have any dealings whatsoever with the company, and those who do so deal25 LEXOLOGY - Association of Corporate Counsel: Essay by Dentons’ NormEmblem & Era Basmadjian [The Indoor Management Rule Explained] This can befound at: http://www.lexology.com/library/detail.aspx?g=469212cf-f6d8-458d-8a5d-2722c5d4ba99 26 Ibid. 27 LR 7 HL 869

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with them must be affected with notice of all that is contained in those two

documents.

After that… all that the directors do with reference to what I may call the

indoor management of their own concern, is a thing known to them and

known to them only; subject to this observation, that no person dealing with

them has a right to suppose that anything has been or can be done that is

not permitted by the [articles or by-laws]…

[W]hen there are persons conducting the affairs of the company in a manner

which appears to be perfectly consonant with the articles of association, then

those so dealing with them, externally, are not to be affected by any

irregularities which may take place in the internal management of the

company. They are entitled to presume that that of which only they can have

knowledge, namely, the external acts, are rightly done, when those external

acts purport to be performed in the mode in which they ought to be

performed."(12)

After the decision in Mahony, the indoor management rule was applied

throughout the common law world.28

The CA. Fiduciary Duties as an element of Corporate

Governance.

According to the CA a director is a person occupying a

position by whatever name called under section 535.

Furthermore, only individuals are eligible for appointment as

a director but not if s/he is less than 18, of unsound mind or

an undischarged bankrupt (sec. 64 of the CA).

28 LEXOLOGY - Association of Corporate Counsel: Essay by Dentons’ NormEmblem & Era Basmadjian [The Indoor Management Rule Explained] This can befound at: http://www.lexology.com/library/detail.aspx?g=469212cf-f6d8-458d-8a5d-2722c5d4ba99

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29On its face it does appear that the statement to be discussed

is entirely true without the provisions to allow Corporate

Governance; but I believe that the CA of Guyana provides for

good Corporate Management. What I believe is badly needed is

greater transparency and serious penalties imposed for

infractions (This will be further discussed below).

I do place great emphasis and value that the director’s powers

are circumscribed within the articles of the company and the

provisions laid out in the CA that requires directors to owe

the company a fiduciary duty and its shareholders a duty of

care.

The statutory provision is worded thus:

96 (1) Every director or officer of a company in exercising

his powers and discharging his duties must:

(a) act honestly and in good faith with a view to the

best interest of the company; …

(2) in determining what are the best interests of a company, a

director must have regard to the interests of the company’s

employees in general as well as to the interests of the

shareholders.

In common everyday language – this is to say – “with great

power comes great responsibility.” I respectfully submit that

section 96 (1) (a) and (2) makes it clear that a director’s

power is not unlimited and unfettered.

29 Interestingly, a defect in the election, appointment or qualification ofa director does not adversely affect the validity of the acts of directorsand officers; see section 82 of the CA.

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Furthermore; the circumstances under which directors are

appointed and terminated lies an implicit power by the

shareholders that in my respectful view places both directors

and shareholders on a level plain field. And, here lies a

great opportunity for Shareholders to impose greater Corporate

Governance. In my respectful opinion, this is a vital

contributing factor to be able to effect Corporate Governance

through the possible intervention by the shareholders.

Directors are appointed under four circumstances.

1) By operation of the law since Articles must be accompanied

(section 7) by particulars of first directors and their

consent (67)

2) Elected by the shareholders as part of the normal business

of the Annual General Meeting: s 112(6) (c);

3) By appointment to fill a casual vacancy: s73.

4) By operation of a shareholders agreement or the Articles.

Again under the circumstances that would terminate directors,

we see the inherent power of the shareholders. Therefore if

shareholders assert their statutory powers and assess their

directors (formally or informally; sometimes they will have to be creative in

finding out what is truly happening in the company and do some form of assessing

of their directors) – they then can move to assertively clean house.

Majority of the time – if not always – the ones that get hurt

from a lack of Corporate Governance are the Shareholders.

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Also, although a director’s term comes to an end by death or

resignation under s 70; a director can also be removed by

ordinary resolution under S71 (shareholders are given the

power to vote out the directors). Directors may also be

disqualified by virtue of Section 64 or by the Court on the

application by the Registrar (64 points 65).

The power to terminate a director, shows great control over

the director. I believe that a prudent director will function

under the cognisance that the shareholder has this power – and

be seen exercising this power – a director would be more mindful of

his or her duty of care to the shareholder. I am mindful that there are

times that the interest of the company will supersede the

interest of the shareholder.

On the issue of having a need for a board, in the jurisdiction

of Guyana there is no need for a board to be the watch dogs

for the shareholder because under the Powers and duty to

manage the company [Although section 59 empowers the directors to manage

the company and section 96 lays down the duties of the directors as it relates to a

fiduciary duty to the company and a duty of care to its shareholders and

employees]; section 61 grants the power to the company, if it so

chooses, wholly or in part to restrict or limit the powers and

duties of the director as proscribe in the articles.

Hence, the directors and officers are subjected to the

standards now incorporated in statutes having the two

elements: a fiduciary duty and a duty of care.

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6. Guyana Securities Council 30 - a fanciful weak force

As defined by the Ministry of Finance: Guyana Securities

council ‘The Council’ is a statutory body created by the

Securities Industry Act 1998 and brought into existence

by Ministerial Order No. 5 of 2000 by the Minister of

Finance with effect from 16th December, 2000. The Council

commenced activities on 24th September, 2001.

30 Ministry of Finance – Guyana; found at: http://www.finance.gov.gy/about-us/agencies

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The principal functions of the Council, under section 5

of the Securities Industry Act 1998, are - inter alia - to:

· Advise the Minister of Finance on all matters relating

to securities;

· Maintain surveillance over the securities market and

ensure orderly, fair and equitable dealings in

securities;

· Protect the integrity of the securities market against

abuse arising from the practice of insider trading;

· Create and promote such conditions in the securities

market as it may seem necessary, advisable or appropriate

to ensure the orderly growth and development of the

capital market.31

A look at the main recommendations by The Council.

Among other things, the Guyana Securities Council

proposed code called for timely elections for directors

and that they should make themselves subject to re-

elections by the Shareholder32. They also recommend

specified terms for non-executive directors and a public

justification to combine the chairman and chief executive

officer positions; as well as the disclosure of details

of the remuneration of executive and non-executive

31 Ibid32 Excepts were taken from Stabroek News - Dec.1 2003, [Securities council issues draft corporate governance code-greater role for non-executive directors] file:///C:/Users/User/Desktop/THIRD%20YEAR%20SECOND%20SEMESTER/CORPORATE%20MANAGEMENT/Securities%20council%20issues%20draft%20corporate%20governance%20code.html

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directors. For the most part the entire set of

recommendations mirrors the fiduciary duties and

procedural functions of the laws that already exist in

the Companies Act of Guyana.33

It does, however, include ‘watchdog’ polices and

highlights the benefits thereof; for example: …the ideal

situation would be for companies to have a strong and independent non-

executive element on its board as well as a senior independent non-executive

element on its board as well as a senior independent director other than the

chairman to whom concerns can be brought. These persons should be

identified in the annual report. Furthermore; the code highly suggest for the

eradication of any conflict of interest within a majority of non-executive

directors to be independent of management and be free from any business or

relationship that could interfere with their independence of judgment.34

The Council also, strongly suggest three mandatory committees on a

company’s board. – AUDIT, REMUNERATION AND GOVERNANCE.35

Mr. Christopher Ram has noted that there has been several

attempts in approaching the issue of Corporate Governance in

Guyana. Mr. Ram has cited and published many areas of

corruption in Government and I reason that, it is this

corruption that extinguishes all will to actually and truly

implement REAL Corporate Governance in Guyana – creating the

many potholes in the road to a Corporate Governance Code. The

33 Ibid. 34 Ibid.35 Ibid.

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corruption in Governmental politics and Corporate Guyana, in

my respectful opinion is intertwined.

In his article, Mr. Ram states: …recommendations for a Code of Corporate

Governance in Securities Markets. Unfortunately, those recommendations

were ignored by many public companies and the Securities Council was never

able to translate the recommendations into a binding code.36 But not only

were the recommendations ignored by many but they were actually

challenged by a senior executive of Demerara Tobacco Company Limited, Mr

Chandradat Chintamani37, now a director of Demerara Distillers Limited, one

of Guyana’s premier public companies. Mr. Chintamani, echoing the public

sentiments of his then boss Mr Michael Harris, wrote in 2004 that he was

“unaware of the requirement for a public company to provide a statement on

Corporate Governance.”

It is important to mention that The Council in recent

times, has come under heavy fire.

In May 18th 2014, the media reported that the Guyana

Security Council’s CEO, Legal Officer have been called to

resign.38

36 Ram, Christopher, [Another corporate governance code for Guyana] found at: http://www.chrisram.net/?tag=corporate-governance37 Mr. Chandradat Chintamani Vice Chairman, CAGI Operations Manager, Demerara Distillers Limited

38 Kaieteur News Article filed as KNEWS, May 18th, 2014; found at: http://www.kaieteurnewsonline.com/2014/05/18/guyana-security-councils-ceo-legal-officer-called-upon-to-resign/

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Furthermore; The Council has been accused of acting

arbitrarily39. Claims like these greatly erode the

integrity and diminish the credibility of The Council.

Mr. Ram stated that there is no indication whether the public companies were

consulted by way of a draft for discussion or participation in any forum.40

Mr. Ram continued to look at an even more recent Supervision

Guideline 8 – Corporate Governance. Acting under the

authority of the Financial Institutions Act of 1995 (FIA) and

the Bank of Guyana Act.

That guideline which came into effect on January 14, 2008

covers a variety of governance related issues.

Doing a thorough analysis of both the PSC code and the

Securities Council’s recommendation; Mr. Ram profoundly states

that: Ironically, the PSC code has no more authority than the

Securities Council’s recommendations, and it would be

interesting to see whether the PSC’s leading members, acting

in their company capacity, will take their new code seriously.

Ambitiously; the code encourages companies to report on how

they apply relevant corporate governance principles in

practice, and also to be responsible enough to give an

explanation to the shareholders of the reason(s) if they

deviate from the code. This is sometimes referred to as

39 Ibid. 40 Ibid.

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[comply or explain]41. The code also calls on companies to

provide information on their corporate governance policies and

principles at the request of shareholders for further

evaluation, the very things Demerara Tobacco Company (DEMTOCO)

said they would only provide if the law so required it.

The PSC code

Let us now look at some of the code’s main provisions that appear to

warrant attention.

Section I: The Board of Directors

This section contains eight principles and runs to eight pages.

Principle 1 paraphrases the provisions of the Companies Act 1991 with

respect to the powers, functions and duties of the directors. One new

and interesting feature is the requirement that the annual report “set

out the number of meetings of the board and those committees and

individual attendance by directors.”

41‘Comply or explain’ approach which was introduced in the Cadbury Committee Report. Sir AdrianCadbury in his seminal book ‘Corporate Governance and Chairmanship, A Personal View’(2002)stated ‘The most obvious consequences of the publication of the 1992 Code of Best Practice was thatit put corporate governance on the board agenda. Boards were asked to state in their reports andaccounts how far they complied with the Code and to identify and give reasons for areas of non-compliance’. The flexible approach provided by the ‘comply or explain’ approach is a great strengthand has been adopted in many countries. This explanation was extrapolated from:Mallin, Chris UK [Corporate Governance Code] Posted May 29, 2010 and can befound at: https://corporategovernanceoup.wordpress.com/tag/adrian-cadbury/

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Principle 2 boldly calls for a clear division of responsibilities at the head

of the company and makes it mandatory that the Chairman and Chief

Executive Officer (“CEO”) be separate persons. It also requires that the

division of responsibilities between the Chairman and CEO be clearly

established, be set out in writing, and be agreed by the Board.

Mr. Ram further points out:

This separation of the CEO and the Chairperson has been widely

discussed… The ‘big man’ culture in Guyana is for a unification of these

functions into one holder. Guyana has larger-than-life incumbents in

these positions at Banks DIH and DDL, but with the lead persons in the

PSC directly associated with those two companies it seems reasonable

to assume that those companies are in agreement with the rule.

The above crucial point that Mr. Ram mentions is synonymous to

fostering a breeding ground for corruption – it reminds me of

the Polly Peck case; where one man had so much control – as I

have mentioned above, that in agreeing that the road to a

Corporate Governance Code is littered with POTHOLES – THE

POTHOLES ARE THE BREEDING GROUNDS THAT fosters corruption and

non-implementation of Corporate Governance policies or code

proposals; that already exist.

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7. UK Corporate Governance Code 42 formerly known as the

Combined Code. (Cadbury Report).

42 A September 2014 edition of this THE CODE can be found at:https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

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The Cadbury Report43(chaired by Adrian Cadbury44) states: …the

continuing concern about standards of financial reporting and

accountability, heightened by The Bank of Credit and

Commercial International (BCCI), Maxwell and the controversy

over directors’ pay, which has kept corporate governance in

the Public eye. In short Robert Maxwell, was reported to have

stolen over £440 M which converts to $137,095,937,880.00

Billion Guyana Dollars; much of which was repaid by his

company. Now I truly see why Academic Christopher Ram keeps

hammering the need for remunerations to be disclosed. Many

times it is by way of salaries and bonuses that these people

steal form pension plans or shareholders.

The Cadbury Report is an antecedent to the more recent UK

Corporate Governance Code 45 formerly known as the Combined

Code. This was issued by the Financial Reporting Council (FRC) as a response to

the financial crisis which caused shock waves around the world46.

43 Report of the Committee on [The Financial Aspect of Corporate Governance]December 1st, 1992 Great Britain, Burgess Science Press. Found at:http://www.ecgi.org/codes/documents/cadbury.pdf 44 Sir George Adrian Hayhurst Cadbury CH (Companion of Honour), DL (DeputyLieutenant) former British Olympic rower and Chairman of Cadbury andCadbury Schweppes for 24 years. He has been a pioneer in raising theawareness and stimulating the debate on corporate governance and producedthe Cadbury Report, a code of best practice which served as a basis forreform of corporate governance around the world.He was a Director of the Bank of England from 1970–94 and of IBM from 1975–94. He was member of the OECD Business Sector Advisory Group on CorporateGovernance. His publications include: Ethical Managers Make Their Own Rules; TheCompany Chairman; Corporate Governance and Chairmanship: A Personal View.45 A September 2014 edition of this THE CODE can be found at:https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf 46 Mallin, Christine UK [Corporate Governance Code] Posted May 29, 2010Filed under: corporate governance codes, Economic crisis, and Executivepay.

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Professor Christine Mallin47 has conducted a thorough

evaluation of the new code, focusing on the main changes and

their significance:

The UK Corporate Governance Code (hereafter ‘the Code’) continues to have

at its heart the ‘comply or explain’ approach.

Code structure

The Code has five sections being Section A: Leadership; Section B:

Effectiveness; Section C: Accountability; Section D: Remuneration, and Section

E: Relations with Shareholders.

A few of the main changes to the Code

‘To improve risk management, the company‘s business model should be

explained and the board should be responsible for determining the nature

and extent of the significant risks it is willing to take.

 Performance-related pay   should be aligned to the long-term interests of the

company and its risk policy and systems.

To increase accountability, all directors of FTSE 350 companies48 (in this

regard, Guyana could identify the top 100 companies and apply this rule)

should be put forward for re-election every year. Contentious changes?

47 Professor Christine Mallin is a Professor of Corporate Governance atNorwich Business School; she is also the Head of the Accounting, Financeand Governance (AFG) Group. Professor Mallin has undertaken a wide range ofcorporate governance research over the years and published widely inacademic and professional journals.

48 The FTSE 350 Index is a market capitalisation weighted stock marketindex incorporating the largest 350 companies by capitalisation whichhave their primary listing on the London Stock Exchange. It is acombination of the FTSE 100 Index of the largest 100 companies andthe FTSE 250 Index of the next largest 250.

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The changes that seem most likely to be contentious and attract most debate

relate to the annual re-election of directors and the move to encourage

boards to consider diversity, including gender, in board appointments.

 Annual re-election of directors

According to Rachel Sanderson and Kate Burgess, in their article ‘Directors

must be re-elected annually’   (FT, page 17, 28 th   May 2010) , the annual re-

election of directors in FTSE 350 companies is the most controversial aspect of

the Code (This also may not rest well with companies is Guyana –

Directors don’t want to be remove). They state ‘Critics’, including the

Institute of Directors, have said it will encourage short-termism and be

disruptive49. Those in favour have said it will make boards more accountable

to shareholders’.

The widespread concern about the underperformance of some UK board

directors prior to, and during, the recent financial crisis no doubt led to

increased support for the idea of the annual re-election of directors.

Diversity: The UK has not gone as far as Norway which has, since 2008,

enforced a quota of 40% female directors on boards of all publicly listed

companies. Similarly Spain introduced an equality law in 2007 requiring

49 I do agree with this point but more so, I believe it will increase accountability. I had pointed out under the appointment of Directors that:In my respectful opinion, this is a vital contributing factor to be able toeffect Corporate Governance through the possible intervention by the shareholders. For Guyana, Directors are appointed under four circumstances. 1) By operation of the law since Articles must be accompanied (section 7) by particulars of first directors and their consent (67) 2) Elected by the shareholders as part of the normal business of the AnnualGeneral Meeting: s 112(6) (c);3) By appointment to fill a casual vacancy: s73.4) By operation of a shareholders agreement or the Articles.

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companies with 250+ employees to develop gender equality plans which

clearly has implications for female appointments to the board.

Whilst it is fair to say that the number of females with experience at board

level in large UK companies is relatively limited, non-executive directors can

be drawn from a much wider pool including the public sector and voluntary

organisations. Their experience can bring new insights to the board, maybe

challenging long-accepted views and hence adding value.

Millian concludes by pointing out that: The FRC has produced a robust UK

Corporate Governance Code, building on the earlier Codes and retaining the

flexibility of the ‘comply or explain’ approach. Future success will be

measured by companies following the substance, or spirit of the Code, and

not just its form and by institutional shareholders and boards engaging more

fully.

8. Conclusion:

In conclusion; much of all the current proposals – for a

CORPORATE GOVERNANCE CODE for Guyana, for the most part, COULD

BE SAID TO BE a mirror reflection of the Companies Act. What

is truly needed – and I reiterate – is the WILL to enforce

what already exist then seriously move to quickly formulate a

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code similar to that of the UK (no need to reinvent the

wheel). And, more importantly, Guyana needs to establish [or

re-establish The Council of the Private Sector Commission (PSC)] as an

autonomous governing body like that of The UK’s Serious Fraud

Office. The SFO is an independent government department,

operating under the superintendence of the Attorney

General.  Its purpose is to protect society by investigating

and, if appropriate, prosecuting those who commit serious or

complex fraud, bribery and corruption and pursuing them and

others for the proceeds of their crime.  It operates in line

with its statutory purpose and policies of the UK.

Furthermore, I reiterate that as Mr. Ram has cited and

published many areas of corruption in Government; I

respectfully posit that, it is this corruption that

extinguishes all [WILL] to actually and truly implement REAL

Corporate Governance in Guyana – creating the many potholes to

the road to a Corporate Governance Code. The corruption in

Governmental politics and Corporate Guyana, in my respectful

opinion is intertwined; AND THE ROAD TO A CORPORATE GOVERNANCE

CODE MAY NEVER BE PAVED.

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Bibliography

1. Ministry of Finance – Guyana; Home Page found at:http://www.finance.gov.gy/about-us/agencies

2. Companies Act of Guyana commencement order #25 of 1995;hereinafter referred to as the CA.

3. The Serious Fraud Office Home Page Found at:http://www.sfo.gov.uk/

4. Camber, Rebecca (Crime Reporter), [Nadir Stole PoundsSterling 150 M to Pay for his Life of Luxury] Daily MailLondon January 24, 2012, Website. Edition

5. Thomson, Lisa Mary, ET Bureau, [What is CorporateGovernance?] January 18th, 2009.

6. Bank of Guyana – Director’s Handbook, found at: http://www.bankofguyana.org.gy/Documents/Full%20book.pdf

Page 33 of 36

7. Coleman Jules and Shapiro Scott, [The Oxford Handbook ofJURISPRUDENCE & PHILOSOPHY OF LAW] Oxford University Press(Oxford New York) 2011

8. Jeremy Waldron, [Published Essay – LEGAL AND POLITICALPHILOSOPHY] The Oxford Handbook of JURISPRUDENCE &PHILOSOPHY OF LAW] Oxford University Press (Oxford NewYork) 2011

9. Guyana’s Private Sector Commission – CORE VALUES #2Respect all Shareholders. This can be found at:http://psc.org.gy/about/#intro

10.StabroekNews.com, [Guyana still in very corrupt categoryof Transparency International Index] December 3, 2014 – bySTABROEK EDITOR

11.Sealy Len, Worthington Sarah, Sealy’s Cases and Materialsin Company Law, OXFORD Published in the United States byOxford University Press Inc., New York. 2010

12.LEXOLOGY - Association of Corporate Counsel: Essay byDentons’ Norm Emblem & Era Basmadjian [The IndoorManagement Rule Explained] This can be found at:http://www.lexology.com/library/detail.aspx?g=469212cf-f6d8-458d-8a5d-2722c5d4ba99

13.Excepts were taken from Stabroek News - Dec.1 2003,[Securities council issues draft corporate governancecode-greater role for non-executive directors]

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file:///C:/Users/User/Desktop/THIRD%20YEAR%20SECOND%20SEMESTER/CORPORATE%20MANAGEMENT/Securities%20council%20issues%20draft%20corporate%20governance%20code.html

14.Ram, Christopher, [Another corporate governance code forGuyana] January 11, 2009 found at:http://www.chrisram.net/?tag=corporate-governance

15.Kaieteur News Article filed as KNEWS, May 18th, 2014;found at:http://www.kaieteurnewsonline.com/2014/05/18/guyana-security-councils-ceo-legal-officer-called-upon-to-resign/

16. ‘Comply or explain’ approach which was introduced in theCadbury Committee Report. Sir Adrian Cadbury in hisseminal book ‘Corporate Governance and Chairmanship, APersonal View’ (2002).

17.UK Corporate Governance Code, A September 2014 edition of‘THE CODE’ can be found at: https://www.frc.org.uk/Our-Work/Publications/Corporate-Governance/UK-Corporate-Governance-Code-2014.pdf

18.Report of the Committee on [The Financial Aspect ofCorporate Governance] December 1st, 1992 Great Britain,Burgess Science Press. Found at:http://www.ecgi.org/codes/documents/cadbury.pdf

19.Mallin, Christine UK [Corporate Governance Code] PostedMay 29, 2010 Filed under: corporate governance codes,Economic crisis, and Executive pay.

20.Adele Ramos, Amandala News. (Belize) [FBI bust Billiondollar offshore ‘safe haven’] 12 Sept. 2014

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NB: all cases are kept in footnote format within context material.

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