Shareholders question wisdom of SBP decision: Banks’ BoD meetings abroad
By Dilawar Hussain
KARACHI, July 26: Shareholders in listed scheduled banks viewed with skepticism, the State Bank’s decision to let banks with as little as 31 per cent foreign shareholding to hold the meetings of their board of directors outside Pakistan.
A circular of the central bank released on Tuesday, allowed banks incorporated in Pakistan and having more than 51pc foreign shareholdings to hold maximum of four BoD meetings outside Pakistan, in a calendar year. An investor in stock of a private sector bank remarked that the limit had already been enhanced from two to four meetings vide the circular on February 22 this year. “The central bank in its latest directive issued on Tuesday has gone further to allow with even smaller foreign equity participation in Pakistani banks to convene their meetings overseas,” said this investor.
The BoD meetings for banks with more than 51pc foreign shareholding had been kept unchanged at four in a calendar year but it had now been decreed that boards having more than 30pc but less than 41pc foreign shareholding could hold one BoD meeting outside Pakistan.The investors’ objection was in respect of extra costs that the banks would incur while sitting atop the depositors’ money. But more than that they wondered if the step could be construed as a wrong signal to foreign investors, such as security concerns for overseas directors to come over to Pakistan. The one meeting that banks with just about 31pc equity holding has been allowed to be held outside the country is likely to be the board’s annual meeting. The Law provides that a nominee of a director unable to attend board meetings could participate instead. “So why not take that cheaper route instead of taking a whole entourage at an expensive recreational city?” asked an ex-official of the corporate regulatory body. He did however agree that banks such as Faysal Bank, where an overwhelming equity holding stood vested in foreign investors were justified to hold their meetings, where most of the directors resided or wanted the meetings to be convened.
In regard to costs, a director on the board of a bank mentioned that it would not just be the half a dozen or a dozen members sitting on the board who could leave leisurely for Paris or Geneva, but a tem of dozens of officials would accompany them. Those could include the company secretary, the chief financial officer, the deputy financial officer and heads of other departments such as those of credit, deposits and marketing. “Consider the huge costs that would be involved,” he said. Another disgruntled corporate executive claimed that this perk would be in addition to an average pay of Rs3 million that the president of a medium-sized bank draws.
But a senior banker, Shaukat Tarin, told Dawn that it was best to leave it to shareholders to assess the merits and demerits. He said that in a free market economy, over-regulation was undesirable. He thought that most banks would give due consideration to costs and if they find them really high, they would decide to hold the meetings in the country.
Tarin, nonetheless, said that banks should be directed to show the cost of holding board meetings separately in their Profit & Loss Account, which currently was not being done.
He pointed out that listed companies including banks were now under greater scrutiny, both by the corporate monitors as well as investors: “Where shareholders feel that benefits of holding meetings abroad do not justify costs, they would take the board to task,” he said and added that the issue had best be left to the shareholders.
“Was the step (unwittingly) flashing a wrong signal about security of foreign nationals in Pakistan?” A simple question, but no one wanted to answer it.
