Coming with clean hands

By moving to elect three ‘independents’ to serve alongside the stock brokers and listed company directors, the Trinidad and Tobago Stock Exchange, some say, is trying to keep up with the changing times. But the move is also being seen as one needed to prevent both brokers and directors from pursuing their own agendas.

At a special meeting on Monday at the Crowne Plaza Hotel, the stock exchange amended its bye-laws  to have three independent directors appointed. A resolution giving effect to the change will be put forward at the exchange’s next annual general meeting in May. Former Stock Exchange Chairman and listed company director described the independent as “third parties,” noting that the intention was to bring a different level of directorship. It is all part of the demutualisation process, he said. He said it was having independents was something he was working on for a long time.

But CMMB Securities managing director Robert Mayers is of the view that the stock exchange needs people “not involved and affiliated with the stock brokers and listed company directors.” For too long, there has been “wrangling between the listed directors and brokers,” he said, citing the tardy implementation of the Central Depository System. “We had two Chairmen —  Young and Ronald Huggins — and it was still not implemented,” he said of the imbroglio surrounding the implementation of  Depository.      

Before Monday’s meeting, the composition of the stock exchange was  made up of five brokers and five listed company directors. The stock exchange members voted to change the configuration to four brokers, four listed company directors and three independents, one of whom may be Hugh Edwards, manager of the Stock Exchange. The stock brokers at the exchange are: Peter Clarke, West Indies Stock Brokers, Winston Padmore, Trinidad and Tobago Stock and Shares, Kathleen Dhannyram, Chairwoman of the stock exchange and managing director, Reliance Stock Brokers, Subhash Ramkelawan, Bourse Securities and Alvin Johnson of Caribbean Stock Brokers.

The five listed companies directors are : TCL CEO Rollin Bertrand; Scotia Bank managing director Richard Young, Guardian Holdings corporate secretary, Fe Lopez-Collymore, Godfrey Bain, Chief Operating Officer at Angostura and Ronald Huggins, former deputy managing director, who has since retired. “There could be a conflict of interest in that people who own the exchange — the brokers and the listed company directors — have a vested interest in it,” observed one stockbroker, who spoke under condition of anonymity. “The independents will bring a degree of independence to the board,” Bain said, when asked about share holders pursuing their own agendas.

Bain, Chairman of the Central Depository, said he  welcomed having independent voices on the exchange. Noting that while he was aware that both brokers and listed company directors may bring  their own biases on board, he said he had not encountered this to “any great extent.” He said that the independents  will also bring a balance to the governing of the board. GHL’s Fe Lopez-Collymore, another listed company director, noted that there is the public perception that having brokers and company representatives on the stock exchange, is a conflict of interest.

The independents, she felt, could curb such a perception. “Having independents will diminish the perception that there are conflicts of interest,” she said. But there are still concerns. “There are a lot of listed companies who feel that it is not proper to have listed company representation on the board of the stock exchange,” one stockbroker noted. “Listed companies and brokers see things from a different perspective as to what is good for the exchange”. Clarke noted though  the move was meant to broaden the composition of the board and to change the ownership structure.  The change, he said, was in keeping with the stock exchange’s stated objective to move from one being owned by the brokers and company directors to that of a public company.

The independent directors were chosen by majority vote by those holding class A and B shares, the former belonging to the brokers; the latter to listed companies. An independent director cannot belong to either group. Dhannyran said the three independent directors will ensure that the stock exchange is comprised of people whose interest is purely that of the exchange’s development. “It is another step in raising the calibre of the exchange,” she said, noting that it was a move to make the stock exchange totally independent. Young agreed, saying, “it is all about bringing transparency and good governance to the stock exchange.” He said he was aware that 50 percent of the stock exchange was owned by six broking firms and the rest by listed companies who bought shares. This, he said, may have created the perception that a conflict of interest existed.  
 
Of the charge that the independents could  be a buffer against those having their own agendas, Young said he hoped those sitting on the exchange wouild sit with only the interest of the institution in mind. “Not a broker’s interest or a  company’s interest,” he said. The stock exchage may also not want a repeat of what happened last year, when Huggins refused to step down as chairman of the Stock Exchange. For this reason, a committee was set up to look how such issues could be resolved amicably, and to govern the operations of the stock exchange. This is the second change in the composition of the board. In 1981-1999, the configuration was five brokers, two listed companies, and two government representatives. In 1999 the composition was changed again when the exchange became a company to five brokers and five listed companies. 

TCL’s Bertrand dismissed the idea that there was a perceived conflict of interest among the shareholders of the stock exchange, noting that having independents on board was nothing unusual. “We are creating a structure that is in keeping with international norms,” he said. But as one broker pointed out, “the stock exchange must have board of directors who are not easily influenced, who have the stock exchange at heart, to the exclusion of everything else.”