Building and Loan, and corporate governance in SVG

Fri Feb 15, 2013

Editor: The National Insurance Services (NIS), in conjunction with the International Social Security Association (ISSA) held a very timely workshop on Corporate Governance in St Vincent and the Grenadines last week.{{more}} The two-day workshop was conducted at our NIS Conference Centre on Thursday and Friday and the president of ISSA, Mr Errol Frank Stoové, said in his opening remarks that it is important “to keep in mind the lessons in governance to be gained from the first decade of this century.” Mr Stoové referred to the spectacular collapse of Enron, WorldCom and Arthur Andersen, which he said was mainly brought on by the very questionable business practices used by their CEOs to make their books look good.

Mr Stoové went on to say that one of the dominant causal factors for the current global financial crisis was the “loss of ethical standards in the marketplace, where managers and advisers placed their own interests ahead of the interests of the people that they work for.” Joseph Stiglitz, the renowned world economist of Nobel Prize fame, expressed similar sentiments in his book “Freefall”. Stiglitz told his readers this: “American corporations (and those of many other countries) are only nominally run by shareholders. In practice, to a very large extent, they are run by and for the benefit of the management. In many corporations where ownership is widely diversified among disparate shareholders, management effectively appoints most of the board, and it naturally appoints people who are likely to serve their interests most effectively. The board decides on the pay of management, and the “company” provides good rewards for its board members. It’s a cozy relationship.”

Clem Iton, Jerome Burke, Cecil Ryan, Cools Vanloo, Junior Bacchus, Camille Crichton and many others would attest, from their Building and Loan experience, that the flaws in corporate governance made it difficult to directly change the behaviour and culture of management. They struggled for many years, with limited success, to bring about more accountable behaviour within the Association. The detailed minutes of Building and Loan’s annual general meetings show that as far back as 2008, Luke Browne, as a young university student, was expressing his dissatisfaction about figures in Building and Loan financial statements.

A lack of transparency and deception are hallmarks of bad corporate operations and management should be more accountable to the people who own the companies. The conversation about the health and performance of our financial institutions must not be restricted to accountants and certified financial analysts. There are many working class people who are also shareholders in these companies and who may well be more aware than some of our celebrated financial gurus may think. Arthur Levitt, a respected former head of the US Securities and Exchange Commission, wrote an important book called “Take On the Street: How to Fight for Your Financial Future”. He examined the corporate governance crisis and explained that truth is often hidden in financial statements. Levitt armed us with tools that could help us to protect and enhance our investments. His book is a very valuable resource for these times.

The St Vincent Building and Loan Association needs aggressive activism by concerned shareholders to keep the organization on a full recovery path and a stronger future. Let us keep something built by Vincentians for Vincentians alive; let’s make the pioneers of this erstwhile organization proud of by rebuilding the Association.

The FSA has a role to play and so do shareholders. Let us lead the way, get involved and be informed. Politics and politicians are irrelevant to the recovery of the Association; savings, repayments, rules and order are important.

Long Live St Vincent Building and Loan Association!

Marlon Stevenson